Digital Pound

Andrew Griffith Excerpts

Tuesday 7th February 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

Before I give my statement, may I add my voice to those in the previous statement on the Turkey and Syria earthquake? My heart goes out to all the people affected by that.

With permission, Mr Speaker, I will make a statement about the steps the Government are taking to consider the future role of a potential digital pound. His Majesty’s Treasury is today publishing and laying in Parliament a consultation paper jointly with the Bank of England, “The digital pound: a new form of money for households and businesses?”. This paper aims to open a national conversation about the future of money in the United Kingdom.

The way money is used in the UK is changing, as it is across the world. Cash will remain important, but banknotes, issued by the Bank of England, are being used less frequently by households and businesses. New technologies are allowing for the emergence of new forms of digital money, and new ways and devices to pay for goods and services with it. International developments have the potential to affect the UK domestically and our position as a global leader in finance. Ensuring that public trust in money remains high, and that forms of money and payments meet the evolving needs of individuals and businesses, are fundamental responsibilities of the Government on which Parliament must have its say.

We are determined that the UK should remain at the forefront of innovation in money, payments and financial services. This is part of the Government’s vision for a technologically advanced, sustainable and open financial services sector—a sector that is globally competitive and acts in the interests of communities and citizens, creating jobs, supporting businesses and powering growth across all parts of the UK.

A UK digital pound would be a new form of digital money for use by households and businesses for their everyday payment needs. The digital pound would be a new form of sterling, similar to a digital banknote and issued by the Bank of England. For people and businesses, the experience of using a digital pound would be very similar to using other forms of digital money. For example, it would be accessible online via smartphones and computers, as well as through cards that could be used at point-of-sale terminals.

I want to be clear that the Government are legislating to protect access to cash and ensuring that the UK’s cash infrastructure remains sustainable long term. Therefore, as part of the wider landscape of money and payments, the digital pound would sit alongside, and not replace, cash —a digital counterpart to familiar, trusted banknotes and coins, and subject to rigorous standards of privacy and data protection. It would be denominated in sterling, and digital pounds would always have the same value as, and be interchangeable with, the equivalent physical banknote. Unlike cryptoassets and stable coins, the digital pound would be a central bank digital currency; sterling currency issued by the Bank of England, not the private sector.

A digital pound would help to ensure that money issued by the central bank—which is currently available only as cash—remains available and useful in an ever more digital economy. Knowing that there is an ultimate backstop to convert our money—money in our bank or e-money account—into cash or a CBDC at any time is the foundation of confidence in all forms of money, both day to day and in a crisis.

As cash is less and less used, the importance of a digital pound to provide that constant access to Bank of England-issued money could rise. It will safeguard the UK’s monetary sovereignty in a changing global financial system. It could provide a platform for private sector innovation, promoting further choice, competition, efficiency and innovation in payments.

On the basis of our work to date, the Bank of England and HM Treasury judge that it is likely that a digital pound will be needed. It is too early to commit to build the infrastructure for one, but we are convinced that further preparatory work is justified. A future digital pound would be a major piece of national infrastructure, which would take several years to complete. It would need to be safe and secure, and the legal basis for the digital pound would be determined alongside consideration of its design. Its launch would require deep public trust in this new form of money—trust that their money would remain safe, accessible and private.

The journey towards issuing any digital pound, therefore, necessarily involves an open national conversation about the future of our money, in parallel with important detailed technical consideration by experts across UK public authorities, and be informed by evolving market trends. The consultation we have published today will be open for four months. It opens that conversation and seeks to build the foundation of public trust. It sets out our vision of why a digital pound may be needed alongside our vision of how a digital pound could work, should we decide to issue one.

Like a physical banknote, no interest would be paid on the digital pound. Privacy, user control and use of data in line with UK data protection laws are of paramount importance. So I want to reassure the House that our vision for a digital pound would have the same privacy protections as bank accounts, debit cards or cheques. Neither the Government nor the Bank would have access to digital pound users’ personal data, except for law enforcement agencies under limited circumstances, prescribed by Parliament in law and on the same basis as applies to other digital payments. The digital pound would not be anonymous because the ability to identify and verify users is needed to prevent financial crime.

Drawing on the feedback we receive in the consultation, we are committed to move to the next phase of work. That will inform a future decision on whether to progress to building and launching a digital pound. I assure hon. and right hon. Members that a further update to Parliament will be made prior to that. It will also inform our current proposal for its form and function, decisions on which will be taken forward in the next stage. At this exciting time of change in money and payments, this consultation is a vital step in positioning the UK to act decisively, should we choose to introduce a digital pound.

[Mr Speaker]

I call the shadow Minister.

--- Later in debate ---

[Andrew Griffith]

It is always a pleasure to hear from the hon. Lady, in what I think was a welcome from His Majesty’s Opposition for the joint consultation between the Treasury and the Bank of England. She rightly raised issues that I assure her are addressed in the consultation, about which we would like to hear. They include how to ensure privacy, which will be embedded in the design. It is important that we come forward with, potentially, a digital pound precisely to avoid this space being colonised solely by, for example, private large tech companies.

I can assure the hon. Lady that this issue will not in any way distract from our important work on financial inclusion. Cash will indeed continue, and no part of the consultation talks about in any way replacing it. Rather, this is about ensuring access to that currency, so that potentially it will no longer be gated behind existing financial institutions; it could be something that new participants make available to citizens without some of the constraints that are sometimes put on the financial services system. The consultation also addresses the risk, which the hon. Lady rightly raised, should everybody withdraw their money all at once to invest in this digital currency.

However, the hon. Lady’s comments were a speech of two halves, and the second half was as wrong as it was unnecessary. This Government have never promoted a crypto wild west. The current Financial Services and Markets Bill contains more measures to protect consumers. The risks that consumers face have always been extremely clear, but when it came to financial promotions, one of the biggest challenges we faced was the Mayor of London and Transport for London, which gained a reputation for accepting particular adverts from the crypto industry.

[Harriett Baldwin (West Worcestershire) (Con)]

The Treasury Committee has opened an inquiry into crypto, and this morning we had a session at which the chief executives of the major high street banks appeared before us. The real question we wanted to ask them was why they have been paying our constituents so little on their savings since the Bank of England started to increase rates. Is not the logical conclusion of the consultation process that my hon. Friend has opened today that each of us should be able to hold a digital currency account at the Bank of England, and to earn the Bank rate on our holdings and disintermediate the entire banking sector?

[Andrew Griffith]

I thank my hon. Friend for her, as ever, wise points, as well as her wise chairmanship of the Treasury Committee. It is absolutely imperative that savers get the interest rates that they are entitled to. I commend my colleagues in National Savings and Investments, who have significantly increased the rates offered to savers. Of course, she also raises one potential opportunity, in that, although a digital pound would sit alongside our existing financial services infrastructure, it potentially offers consumers and citizens a different choice, which could involve the ability to hold currency through intermediaries other than the current banks.

[Stewart Hosie (Dundee East) (SNP)]

When I was in the US with the Treasury Committee some years ago, we were given two choices: either 95% of all crypto was fraud and froth, or 100% of all crypto was fraud and froth. Clearly, a central bank-backed asset is a different beast; but nevertheless, I have three questions. First, what problem is this idea designed to solve? Secondly, what happens if this digital asset becomes volatile? If it stops behaving like a currency and starts to behave like a bond or equity, or debt, or something speculative like a non-fungible token, how will it be regulated? Thirdly, the Minister said the digital pound, in this new form, will always be worth the same as a traditional pound. What if the market determines that that is not true and there is a divergence between the fiat currency value and this new non-fungible, Bank-backed token? Who picks up the tab when people potentially start to lose money?

[Andrew Griffith]

The right hon. Gentleman runs the risk, if I may say so, of confusing a particular attribute of what is a very large sector. This is not a cryptoasset; the digital pound would not have those speculative attributes. The fact that £10 in digital pounds would be fully exchangeable for £10 in His Majesty’s finest banknotes would prevent that divergence—if it did not, that would present the right hon. Gentleman with a profitable opportunity that he could use to supplement his other activities. He raises other questions, which are rightly the subject of the consultation. I extend the invitation to all parts of the United Kingdom, and we look forward to his constituents and compatriots being able to contribute.

[Richard Fuller (North East Bedfordshire) (Con)]

If I was the Minister, I do not think I would not be quite as confident in my response to the SNP Opposition spokesman: that a digital pound will not affect the pound in our pocket. However, I broadly welcome the consultation, and I am very pleased that this Minister will be overseeing it. He will be aware that during covid we went through a period of extreme authoritarianism in this country. He will also be aware of some of the risks from central bank digital currencies to individual financial freedoms—he enunciated some of them in his statement. At the end of the consultation, will the Minister therefore also look to draft a financial liberty charter that this House can vote on, to protect the freedoms that we experience with currencies today?

[Andrew Griffith]

My hon. Friend and, indeed, predecessor highlights one of the potential concerns: one is either instinctively too early or too late in bringing matters to this House. Although this is a long-term project—the consultation makes it clear that a digital pound would not be introduced before the second half of this decade—it is right that we start conversations on precisely the important matters that influence the liberty of every one of us at this moment in time. So while I will eschew his choice of words, I assure him that liberty remains paramount, which is one reason why it is very clear that any digital pound should not replace, but should sit aside, the anonymity that is currently offered by physical cash.

[Sir Stephen Timms (East Ham) (Lab)]

I welcome the Minister’s statement. Firms setting up to deliver blockchain-based financial services in the UK complain that getting a licence here takes far too long because the Financial Conduct Authority does not have the capacity to process the applications. A number of very successful firms have been forced to leave the UK altogether as a result. What plans does the Minister have, as part of this work, to tackle that particular problem?

--- Later in debate ---

[Andrew Griffith]

The right hon. Gentleman might usefully and productively have a conversation with his own Labour Front Benchers, who only a moment ago were accusing us of moving too fast. The two points show that the financial regulators have in this particular case got the balance about right in their approach to cryptoassets. He will also know that last week we published a proposal for the regulation of cryptoassets more generally. This is not a cryptoasset; this is a digital pound. He makes a point that others have also made to me about the speed with which our financial regulators reach their conclusion. I understand that point. Whatever conclusion they reach, it would be desirable that they do so in a way that is as effective as possible and gives as much certainty as possible. It is one reason why there are powers in the Financial Services and Markets Bill, which he will know is going through the other place at the moment, that will compel the financial regulators to publish more of their operating statistics, so that he and I will be able to see how they discharge their duty to regulate in an effective manner.

[Alun Cairns (Vale of Glamorgan) (Con)]

Digital currencies in a whole range of formats are part of a fast-moving and dynamic sector of an emerging economy. To date, the regulators have struggled to keep up with the skills and capacity to bring about appropriate and effective regulation of the sector. What plans does my hon. Friend have to develop capacity within the regulators to give confidence in the marketplace that the digital pound, as well as other digital currencies, will have confidence among users?

[Andrew Griffith]

My right hon. Friend makes an important point. To govern is to choose and we ask our regulators to make choices to prioritise. It is one reason why we are looking at reform of long-standing areas, such as the 40-year-old Consumer Credit Act 1974, to see if we can modernise it and make it more fit for purpose, deliver better customer outcomes, and potentially free up the regulatory environment so they can make choices to focus on the new and emerging threats and opportunities that this domain represents.

[Sir Chris Bryant (Rhondda) (Lab)]

Further to the question from the Chair of the Treasury Committee, the hon. Member for West Worcestershire (Harriett Baldwin), can the Minister be a bit clearer? Will this be an interest-paying currency, yes or no?

[Andrew Griffith]

No.

[Danny Kruger (Devizes) (Con)]

I have two concerns. The first is on privacy, which other Members have mentioned. The proposal is that the Bank of England can become your bank. The Minister says the currency will be private but not anonymous, but the reality is that in certain circumstances it could be neither. It should be possible for authorities to observe the transactions of any citizen if they have cause to do so. Will he confirm that? My second anxiety is on the implications for cash. Will the money used through this new digital mechanism require cash to be withdrawn from circulation in exact proportion? If not, his proposal to print new money will be a sort of cryptocurrency quantitative easing with inflationary implications. If cash will be withdrawn in proportion as the digital pound is issued, we are talking about the end of cash are we not? Progressively, the digital coin will replace the use of cash.

[Andrew Griffith]

I accept that the Command Paper has just been published, but when my hon. Friend has the opportunity, he will be able to look at the detail of the operation of such a scheme, which will reveal that there will be platform intermediaries. People will not have a bank account directly with the Bank of England, except in very narrow circumstances. I understand the concerns, and it is right that we debate the balance between freedoms and our duty to protect citizens from fraud and other things that this House, from time to time, will decide justify the piercing of that veil of privacy.

I want to reassure my hon. Friend on cash. By design, this proposal will not replace cash. From a monetary policy perspective—although that is something, as with all these questions, that Members may respond to during the consultation—it is envisaged that it certainly will not increase money supply, and the one-for-one nature I talked about earlier is important in that regard. To be clear to my hon. Friend, the arbiter of that decision will be individual citizens making the choice as to how they wish to use their money—how they wish to spend it and how they wish to store it.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

The crypto and digital assets all-party parliamentary group, which I chair, greatly welcomes the consultation and the progress being made by the Minister. We are hopeful that a digital pound could enable faster payments and lower cost payments to improve inclusion across the UK. The other issue I wish to raise is international interoperability, in particular with colleagues across the Commonwealth. Will the Minister look at what progress can be made in the realm of collaboration with Commonwealth partners?

[Andrew Griffith]

I thank the hon. Lady for her question and for her work as chair of the crypto and digital assets APPG. I hope it has been a productive number of weeks with the consultation paper on the regulation of cryptoassets and today’s joint consultation paper with the Treasury. The APPG does good work in educating and providing opportunities for Members of this House to engage with this rapidly growing area, which is important to financial inclusion and ensuring that we design in financial inclusion at the start.

The hon. Lady makes a very important point about international interoperability. About 90% of all member countries of the Bank for International Settlements surveyed are looking at doing something similar, so it is right that we engage. We have a strong position of leadership in the financial community, as well as an adherence to the highest quality regulatory standards. That is absolutely in keeping with what we are trying to achieve today.

[Anna Firth (Southend West) (Con)]

I absolutely welcome the Minister’s statement and the commitment from him and the Government to keep the UK at the forefront of innovation in financial services. I heard his answer to the hon. Member for Rhondda (Sir Chris Bryant) that this will be a zero interest-bearing currency, but surely in the fullness of time we cannot have a situation where banks deposit their money at the Bank of England and get the full 4% base rate, while retail consumers and individuals get zero. If the Minister agrees with that, is this not a way to stop the consumer being ripped off by the big four and getting only 0.83% on their interest, while the banks are getting 4% from the Bank of England?

[Andrew Griffith]

I thank my hon. Friend for her endorsement of today’s proposals. She should know that I am as concerned as she is about the fair deal for savers in general. As interest rates have increased, it is absolutely appropriate that savers benefit. It is a virtuous activity, and one that we on the Conservative Benches are very keen to support. The issue of central banks paying other banks interest on deposits is complex. There is a matrix of regulatory advantages and disadvantages from the status of being a bank, and I would be very happy to engage with her more to understand that.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

I do hope that one day the Minister will come to the Durness highland games in north-west Sutherland. He will be very welcome, and he will see just how much money is taken out of the cash machine in Durness—by the way, what a battle we had to get it put back when it was removed! If he goes along the north coast to Wick, he will see how much money is donated to the Wick gala: it is gathered in small shrimp nets and buckets. Tapping an iPhone on a shrimp net simply does not work.

My point is obvious: we rely on cash. In my vast and remote constituency, access to cash is a real challenge if people have to travel huge distances. May I have an assurance that when the Treasury looks at safeguarding access to cash, it will take into account the challenges facing constituencies such as mine?

[Andrew Griffith]

It is indeed my aspiration to visit the hon. Gentleman’s expansive and rural constituency one day. Let me reassure him and the House that this long-term project will in no way take my or my officials’ time and attention away from any of the endeavours that have been put in place to promote access to cash. There are new powers in the Financial Services and Markets Bill, there are obligations on the regulators, and we are working with the banking industry and with Link.

As a Member who represents a rural constituency, albeit somewhat south of the hon. Gentleman’s, I fully understand the importance of access to cash for communities, for people who may be disadvantaged and use cash to budget, and for our increasingly elderly population. That focus remains, and it is not diminished by this longer-term project. As hon. Members, particularly Opposition Members, have highlighted, we have the opportunity to design in financial inclusion and to ensure that no matter who someone banks with, they can benefit from the UK digital pound.

[Aaron Bell (Newcastle-under-Lyme) (Con)]

I thank the Economic Secretary for his statement and for the consultation. Perhaps it is apt that it is being launched on the day we have a new Department for Science, Innovation and Technology. That shows that this Government are taking the long view, as well as managing the short-term pressures that we are going through.

The Economic Secretary mentioned public trust, which will be crucial. In launching the digital pound, what measures will the Government be willing to take to safeguard people against the risk of scams? As we have seen with cryptocurrencies, with bank cards and with online banking, people are vulnerable to scams when things are new. What measures do the Government envisage to ensure that launching a digital pound does not put people at risk?

[Andrew Griffith]

My hon. Friend makes two important points. The first is about the long-term nature of this Government, whose focus on delivery extends to the Prime Minister’s organisation of Departments to ensure that they deliver the outcomes that the British people expect.

My hon. Friend also highlights the importance of financial education. I can commit that, as part of the national dialogue on this important issue, we will give thought to how we ensure that we educate our citizens to prevent them from falling prey to the terrible financial scams that people are trying to perpetrate in the financial system today.

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

I declare non-pecuniary interests as chair of the all-party parliamentary group on blockchain and as a vice-chair of the crypto and digital assets all-party parliamentary group. I am glad to see the co-chair, the right hon. Member for East Ham (Sir Stephen Timms), in the Chamber.

The Minister will know that I led the first debate in this House on cryptoasset regulation; I think he was the Minister who responded. Central bank digital currencies played a major part in my speech, so I welcome the opportunity for a consultation. For all the bad press that cryptoassets have—alas, justifiably—received, there exists an undeniable opportunity, as I am sure he will appreciate, for CBDCs to create an accessible, reliable store of value using the principles of distributed ledger technology. Will he elaborate on the aspects of financial inclusion he hopes to bring forward to ensure equal access to the CBDC for the most digitally excluded of our constituents, not just for the crypto bros?

[Andrew Griffith]

I thank the hon. Member for his contributions to the ongoing debate. I have said that there is an opportunity for us to design in financial inclusion; that is one of the advantages of consulting early and of building a consensus across the House on a subject as important as our nation’s currency. He is quite right that it needs to be accessible and reliable as a store of value; the opportunity for it to sit side by side with cash and with the existing bank and digital payments system should give us the ability to drive financial inclusion outcomes.

[Antony Higginbotham (Burnley) (Con)]

I welcome the Minister’s statement and the foresight that he and the Treasury are showing in getting the consultation out early. What assessment has the Treasury made of the potential impact on our small and medium-sized enterprises—particularly import and export SMEs, which are big users of foreign currency?

[Andrew Griffith]

As my hon. Friend knows, one of the points of friction—one of the costs—is the exchange of currency. It has come down greatly over time, but is still often measured in the percentage points. A true central bank-issued digital currency—a digital pound—that could be much more readily converted without the current number of intermediaries could be a real opportunity for small and medium-sized enterprises engaged in that all-important activity to our great nation: exporting our goods and services.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for his statement. I and many of my constituents, like those of other hon. Members, are still committed to using cash. How will the Minister ensure he sends a message that today’s announcement does not mean that we are moving to a cashless society? How will he secure access to cash? It is already at risk in rural areas as a result of banks’ continuing withdrawal and centralisation, which is leaving people with no option but to operate digitally even when they feel vulnerable and feel that their finances are at risk.

[Andrew Griffith]

Today is not about access to cash; it is about the long-term plans for a digital pound. However, the hon. Member makes a very well-understood point. We are legislating in the Financial Services and Markets Bill to ensure that, for the first time in this country since the Celts minted the original currency, communities will have a statutory right of access not just to withdraw cash, but to deposit it, because it is the ability to deposit that drives the desire of retailers and others to take cash. We want cash to continue to circulate in our society, and we are making provision for that in the Bill, which I hope will soon be on the statute book.

[Carol Monaghan (Glasgow North West) (SNP)]

I have a couple of questions about safeguarding. The Minister said in his statement that the Government will not

“have access to digital pound users’ personal data, except…under limited circumstances”.

Can he give me an assurance that those circumstances will not include Government agencies aggressively targeting vulnerable individuals, for whatever reason?

Several hon. Members have mentioned cash. We know that cash can give people financial independence, particularly if they are in a coercive relationship: not having somebody see every single spending decision they make gives them a slight amount of independence. What safeguards on the digital pound will be put in place to ensure that people still have that protection?

[Andrew Griffith]

I thank the hon. Member for those points; her point about safeguards against coercive control in particular is well made. This is where something like a digital pound can have utility: unlike existing banking relationships, but like cash, it is not subject to the caprices of a particular commercial entity that may apply its own policies. I commend our payment services industry—the UK is blessed with a strong, healthy and competitive banking sector—but for the safeguards that the hon. Member seeks, the digital pound would be additive to the current situation.

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the Minister for his statement and for responding to hon. Members’ questions.

Oral Answers to Questions

Andrew Griffith Excerpts

Tuesday 7th February 2023 Commons Chamber

[Sarah Green (Chesham and Amersham) (LD)]

16. What steps he is taking to help ensure access to in-person banking services.

[The Economic Secretary to the Treasury (Andrew Griffith)]

We want everyone to have appropriate access to banking services. Decisions on branches are commercial decisions for firms to take, but we have ensured that the regulatory structure treats customers fairly. As well as digital and telephone banking channels, alternative in-person services are available via the Post Office, through industry-driven initiatives and through new shared banking hubs.

[Sarah Green]

Following a string of local bank branch closures in recent years, news of yet another branch shutting up shop in Amersham on 1 March has caused great concern to my constituents. Some of those affected will struggle to make the journey to the next nearest branch, and they are not confident that the promised alternative provision will meet their needs. Does the Minister agree that the creation of banking hubs should be triggered by the communities that need them? Will he meet me to discuss the need for such a hub in my constituency?

[Andrew Griffith]

I would be happy to meet the hon. Lady to talk about the challenges her constituents face. In its information pack about the closure, Barclays revealed that only 22 customers use the branch regularly, and that 92% of users are able to fulfil their services through other means.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

The work to deliver a new banking hub in Knaresborough is progressing so well that we are looking at an opening date in only a few months. Will my hon. Friend come to Knaresborough when the hub is open?

[Mr Speaker]

Yes or no.

[Andrew Griffith]

I will be delighted to visit, and I commend the good work done by Link and the access to cash action group.

[Bob Blackman (Harrow East) (Con)]

17. What steps his Department is taking to help improve financial inclusion for under-18s.

[The Economic Secretary to the Treasury (Andrew Griffith)]

For under-18s, financial education is a key part of building financial capability. The statutory citizenship curriculum provides essential knowledge so that 11 to 16-year-olds are prepared to manage their money well.

[Bob Blackman]

I thank my hon. Friend for that answer. Cambridge University has demonstrated in its research that it is actually primary school education that is vital to prepare young people for financial education, but at the moment only one in five children has access to this. Will he consider using part of the dormant assets fund, which I believe totals £880 million, to gain access for children to financial education?

[Andrew Griffith]

My hon. Friend makes an important point about it never being too early to start the important work of financial inclusion. I am convening the financial inclusion policy forum next week, and I look forward to engaging with him on this all-too-important topic.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

18. What recent discussions he has had with the Secretary of State for Levelling Up, Housing and Communities on the impact of inflation on projects to be delivered under the levelling-up fund.

--- Later in debate ---

[Greg Smith (Buckingham) (Con)]

T3. The Financial Conduct Authority is currently advertising for a personal assistant to its chief executive, to work alongside another PA, a chief of staff, a head of office, three private secretaries and a PA to the chief of staff. Given the largesse in their own affairs, what is my hon. Friend the Economic Secretary doing to hold financial service regulators to account?

[The Economic Secretary to the Treasury (Andrew Griffith)]

My hon. Friend makes an important point. That is why the Financial Services and Markets Bill rightly improves the accountability of regulators to Parliament. It is about not just the cost of regulation, but the speed and efficiency of it. I read with concern work from TheCityUK suggesting that 90% of industry respondents thought that the speed of authorisations was either “somewhat” or “extremely” detrimental.

[Feryal Clark (Enfield North) (Lab)]

T4. It has been two weeks since it was revealed that the Treasury provided special dispensation for a sanctioned Russian warlord to use British lawyers to threaten a British citizen, Eliot Higgins. What has the Chancellor done in that time to get to the bottom of this outrageous scandal of the Treasury undermining sanctions and aiding our enemies to use aggressive lawfare tactics designed to intimidate those exposing the truth?

--- Later in debate ---

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

T5.   Last year’s register of overseas entities was meant to crack down on corrupt elites using the UK to launder illegal wealth, but today’s BBC and Transparency International report shows that it is clearly not working, with less than half the required firms making declarations and others fudging it. That brings into question the Government’s commitment to tackling illegal wealth and wealth inequalities. What will the Government do about this?

[Andrew Griffith]

This Government bow to nobody when it comes to cracking down on tax evasion. It is wrong and illegal, and the Government do not support it.

[Chloe Smith (Norwich North) (Con)]

T8. The Chancellor was right to argue last autumn that the NHS needs to help people into work. Will he bring forward more thinking on this as part of his inactivity review or in the Budget?

UK Infrastructure Bank Bill [Lords]

Andrew Griffith Excerpts

Report stage
Wednesday 1st February 2023 Commons Chamber

[Abena Oppong-Asare]

I am not going to take any advice from the Government. They have been in government for 13 years, and what have they delivered so far? I suggest that the hon. Lady support our amendment, which would ensure that things go through properly.

The devolved Administrations must be included in the development of the UK Infrastructure Bank. I have already mentioned the fantastic wind energy sector that we have in Scotland, and I was excited to read about the opportunities that the bank has identified in Northern Ireland. We do not believe that amendment 2 is necessary to ensure that all regions and nations of the UK benefit from the Bill, so we will not support it.

As we enter another year of low growth and failed Conservative government, we know there is a vital need to invest in the infrastructure of the future. We support the establishment of the UK Infrastructure Bank and have sought to improve the Bill throughout. We want to see stronger objectives and reporting for the bank, so that it can play a role in meeting our net zero targets while creating good jobs across the country and supporting the UK supply chain’s resilience, but what the bank needs most of all from the Government is an ambitious plan. Once again, the Government are on the back foot and U-turning at the last minute with amendment 1, on the bank’s reviews. It is yet another sign that Labour is the party with a plan for government—a party that will grow the economy and create jobs for the future.

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is always a pleasure to follow the hon. Member for Erith and Thamesmead (Abena Oppong-Asare). I thank all hon. Members who have tabled amendments and contributed to today’s debate, as well as those who made valued contributions in Committee. Notwithstanding a certain number of amendments, I feel that generally there is good consensus across the House about the core purpose and objective of an important institution.

If we are fully to meet our responsibilities to spread opportunity to all parts of the United Kingdom and support the all-important transition to the clean energy economy, it is right that we take bold action now with institutions such as the UK Infrastructure Bank. We have therefore introduced the Bill to make explicit—with a legislative lock, if you like—the scope of the bank’s objectives

“to support regional and local economic growth”

and

“to help tackle climate change”.

Enshrining the bank in legislation will help to establish it as a long-lasting institution. That is important to colleagues across the House, as we have heard, who agree that it is a welcome initiative. I am glad that there has been general consensus today about the importance of the Bill.

I turn to Government amendment 1, which stands in my name. In Committee, I committed to looking again at the frequency of statutory reviews into the UK Infrastructure Bank and undertook potentially to propose a different frequency at a later stage of the Bill’s passage. It would be a gross mischaracterisation to call the amendment a U-turn; it is simply an example of a listening Minister in a listening Government trying to do what is best to get the institution on the right footing. I thank hon. Members who brought the matter to my attention and shared their views, particularly my predecessor, my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who raised the point in Committee.

It is, I hope, a sign of strength that I considered afresh what was appropriate for the first review period. However, given the pre-existing reviews to which the Cabinet Office and HM Treasury have already committed, and the need to allow a nascent institution time to embed itself, I remain of the view—having taken the question away and looked at it again—that it is right for the first review period to be seven years. However, I recognise the strength of the arguments for, the appropriateness of and the desire for a shorter period between every subsequent review to ensure that this House applies the necessary accountability. My amendment 1 would therefore reduce the interval between each regular review after the first.

[Abena Oppong-Asare]

Does the Minister remember rejecting our amendment about the reviews? He is saying that this is not a U-turn, so I just want to hear from him about that aspect.

[Andrew Griffith]

I hope the hon. Lady would never dream of trying to score cheap political points, as distinct from our good-natured and collaborative discussions in Committee. Rather than setting a new timeframe there and then, we looked at precedent in a quest for the optimal timeframe. I undertook to come back on Report and share a proposal with the House, precisely as I am doing today. Having listened and having made that determination, I can feel the warm radiation of support from the Opposition. I hope to see that good will extending to supporting the rest of the Bill without further amendment.

[Richard Fuller]

As it gets warm and huggy between the two Front Benchers, I would like to remind the Minister that I also tabled an amendment in Committee. I hope that he is feeling warm and huggy towards Government Back Benchers as well. He seems huggy, though I am not sure it is politically correct to say that any more. I want to emphasise that the Minister has been listening, which is why he has come back with the amendment. That is the right thing for him to do.

The serious part of my point is how the institutional culture of the bank is set. The Minister will know from his own experience that the first few years are very important. He says that the first review period will be seven years, and I understand that, but can he share with the House some of his thinking about how that responsibility will be balanced? I think Members on both sides of the House are concerned that we set the institutions and regulators out there a task, but then we do not have the time, the information or the control to hold them to the original principles that we have set. Does the Minister broadly agree with that? Is he comfortable with the way the legislation will now be framed?

[Andrew Griffith]

Let me assure my hon. Friend and the whole House that this institution will not lack the proper scrutiny. In that initial set-up period it will be reviewed by both the Cabinet Office and His Majesty’s Treasury. It will not lack scrutiny. It has an obligation to report annually. On some of the amendments we have discussed today, I have already procured a commitment from the bank to put more information into the public domain about its investments and their location, which Opposition Members have rightly pressed us for.

Although the bank is yet to reach its full complement of staffing and run rate of operations, it has already benefited from a serious review by the Public Accounts Committee of this House. I think it would be worth trying to correct some misapprehensions, but I do not for one moment take away the importance of regular scrutiny. We are talking about public money, and it is of the utmost importance that we engender trust as well as good value for public money.

That Public Accounts Committee report is a good and important piece of work. I absolutely commend the work of the Committee, which does a sterling job to protect the interests of taxpayers. We should always remember our duty of care when we are spending other people’s money. It is a good piece of work, and I am grateful for it. We will respond to it in the usual way through the Treasury minute process to get that on the record.

However, I want to address one or two of the points raised. The report raised concerns about governance, but this is an institution that has benefited from strong financial governance from the get-go. All deals done to date have been reviewed by the full UK Infrastructure Bank board before being approved. Because of that, early deals were also approved by HM Treasury Ministers to ensure that we protected taxpayers’ money.

I am proud, as we all should be, of the bank’s work as it continues to engage with the market and across Government, building on its first 18 months in which it has done 10 deals worth more than £1 billion of additive, incremental investment across all parts of the United Kingdom.

[Richard Fuller]

My hon. Friend has just used the magic word “additive”. Would he care to explain further, in the context of these new clauses and amendments, that the issue of additive capital is a crucial part of the bank’s responsibility? This is not just about protecting taxpayers’ money, but about attracting third-party private capital. One of the points about the proposal to spread the objectives is that it becomes harder to attract that capital when the mission of the institution is more diffuse. The more focus it has, and the more focus my hon. Friend has, the more likely we are to achieve the objective of additive capital that he has outlined so clearly.

[Andrew Griffith]

My hon. Friend is, once again, absolutely right. The principle of being additive is baked into the core charters and constitutions, as well as the steer that my colleagues and I will give.

New clause 1 would insert a provision to prevent the sale of the bank. I understand the concern that has been expressed by Members in the past, but I can reassure them that the bank is intended to be a long-lasting institution. I have detected a strong degree of consensus about the importance of this, both in Committee and here in the Chamber, just as our commitment to net zero is long-lasting and a subject of consensus. We intend the bank to be permanent; it is an essential part of the Government’s infrastructure strategy. Moreover, the new clause is simply not necessary. In the event that any future Government considered a sale of the bank—and that is not my expectation—it would require primary legislation at the time. The new clause cannot bind the House on a future occasion, and in any event it is not necessary, so I ask for it not to be pressed to a vote.

The hon. Member for Erith and Thamesmead has tabled a new clause and an amendment. New clause 2 would require the bank to publish an annual report addressing the geographical spread and ownership of bodies in which the bank invests. That is, of course, its core purpose, and I therefore do not think we need the new clause. We debated this proposal in Committee and, for the reasons that we set out then, we do not propose to accept it now.

The new clause is simply unnecessary, because the bank will already be reporting on its investments: it will publish a summary of them in its annual report and accounts. It captures data in all its deal assessments, and will be happy to make them publicly available. I have received a letter from the bank confirming that it will make publicly available the names of developers and/or sponsors of the projects it supports. It will also provide the geographical location of these projects. I feel pressed by colleagues on this matter. I have procured more information, as the hon. Lady has requested and, again, I ask for this new clause not to be pressed to a vote.

As for jobs, it is actions, not lines of statute, that count. We do not need to deliver an amendment to deliver good jobs; just ask the employees involved in the NextEnergy, Gigaclear and Fibrus investments which the bank has already supported. Every job is a good job. The bank is committed to pursuing the highest environmental, social, resilience and governance policy standards, and we do not feel that there is any added value in simply adding extra lines of statute or red tape for the sake of it, as the hon. Lady proposes. It is actions, not words, on which we are focused.

Amendment 5 asks for the bank’s objective to include reducing regional inequality and improving pay, productivity and living standards, as well as supporting supply chain resilience. However, those are already implicit in the bank’s current objective. That is the very purpose of setting up a UK infrastructure bank—the clue is in the name—and we now have a track record to show what the bank is doing to support regional and local growth.

[Richard Fuller]

Will my hon. Friend give way?

[Andrew Griffith]

I will give way one final time, but my hon. Friend will have to make it count.

[Richard Fuller]

I am not so sure about that, but I know that my hon. Friend has a lot of reading to get through. As he obviously knows, part of what is inherent in the net zero objectives is the fact that there will be an increase in supply chain resilience.

[Andrew Griffith]

My hon. Friend did indeed make his intervention count, because that is a very pertinent point. Of course, the whole purpose of the bank is infrastructure and capability building, and the commitment to regions is at its heart. Regional and local growth are among its core objectives. The more diverse infrastructure we have in all parts of this great United Kingdom, the more we are naturally adding resilience and achieving our objective. Indeed, the strategic steer set by the then Chancellor in March last year makes it clear that the bank must focus on geographic inequalities by reference to the levelling-up White Paper, which includes a comprehensive set of levelling-up objectives and measures and supports the Government’s strategic approach to levelling up. We would rather do that on a portfolio basis than investment by investment, as proposed by the hon. Member for Erith and Thamesmead.

Amendments 3 and 4, tabled by the hon. Member for Tiverton and Honiton (Richard Foord), focus on the important issue of water quality. This is an area where the Government do not need any lessons. We are taking the lead in this matter, and are taking the action that the hon. Gentleman’s party and its leader failed to take in coalition. Sometimes one detects the fervour of a convert, or even the working-out of some past guilt about their failure to take action on water.

[Selaine Saxby]

It is obviously delightful to have another Devon MP who cares passionately about the environment, as did his predecessor. I cannot help but wonder whether, if the Liberal Democrats were serious about this, the Secretary of State for Energy and Climate Change from 2012 to 2015 might have implemented some of these things. Does my hon. Friend the Minister agree that there seems to be a trend of creating opportunities for dodgy graphics and social media content, rather than making serious changes to legislation?

[Andrew Griffith]

My hon. Friend makes an important point. It ill behoves a party that aspires to be taken seriously as a force in British politics to be all about clickbait, misleading graphics and half-truths, rather than about, for example, the data, which show that monitoring has increased from just 5% in 2016—a level at which it would be wrong for anyone to characterise themselves as having their arms around this long-standing issue—to more than 90% today. I understand from my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs that it will be 100% by the end of this year. We are the party that is taking action. We are the party that is finding the data, exposing the conduct of the water companies and putting record investment into the sector to solve this long-standing problem. We are the party that provides the solution.

The hon. Member for Tiverton and Honiton needs to consider whether he wants to be part of the problem or, as we all are, part of the solution. One of his amendments is entirely superfluous, as such a measure is already underwritten by the objectives in the world-leading Environment Act 2021. Only yesterday, we announced ambitious interim targets to deliver those objectives in our environmental improvement plan. I believe that the hon. Gentleman was in the Chamber for the statement that preceded this debate. For that reason, we will accept his amendment, because it sits within the actions that we are taking and the commitments that we have made.

Finally, the amendment tabled by the right hon. Member for Dundee East (Stewart Hosie) would require explicit consent from the devolved Administration before using powers under clause 2(6) that touch on devolved competence. However, I was pleased when his colleague, John Swinney, the acting Finance Secretary, wrote to me indicating that he was happy with the content of the Bill, and would recommend that the Bill receive a legislative consent motion. Last week, I was even more pleased—imagine my delight—when the Scottish Parliament gave the Bill an LCM. The right hon. Member for Dundee East will see that not just the Government but his colleagues suggest that his amendment is not required by the Government in Holyrood. As a result, I very much hope that he will not seek to push it to a vote.

This is an incredibly important milestone and moment in establishing a new national institution that will deliver real social purpose and make an enormous difference to the lives of our fellow citizens across the United Kingdom. Establishing it today in statute will give the market greater certainty and confidence, and encourage significant private sector investment in all of the bank’s priority sectors. By partnering with the private sector—by mobilising the life force of private capital, the ferocious, problem-solving power of business—in areas that might otherwise struggle to get the investment they require, we will help speed up the transition to net zero and level up the UK. With the exception of amendment 4, which I have indicated the Government will not oppose, I hope Members understand the reasoning—even if they do not agree—that I have set out as to why we cannot accept the amendments and new clauses and that they respect the time of the House and agree not to press them to a vote.

[Richard Foord]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

Businesses and bodies the Bank invests in

“(1) The Bank must publish an annual report setting out—

(a) the geographical spread of businesses and bodies it invests in, and

(b) the ownership of the businesses and bodies it invests in.

(2) The Bank must prepare and publish a ‘Good Jobs’ plan for all businesses and bodies it invests in, which requires the business or body to improve productivity, pay, jobs and living standards.” .—(Abena Oppong-Asare.)

This new clause would ensure that the Bank considers the location and ownership of the businesses and bodies it invests in and only invests in businesses and bodies who create “Good Jobs” plans to improve productivity, pay, jobs and living standards

Brought up, and read the First time.

Question put, That the clause be read a Second time:—

--- Later in debate ---

[Andrew Griffith]

I beg to move, That the Bill be now read a Third time.

The Bill will place the UK Infrastructure Bank on a statutory footing and enshrine key aspects of it in legislation, ensuring that the bank’s purpose is clear and enduring. It will enable the bank to lend directly to local authorities and the Northern Ireland Executive, and His Majesty’s Treasury will be able to put the bank into funds. The Bill also guarantees a high standard of transparency and accountability to this House.

The Bill will now enable the bank to be fully operational, ensuring that its two strategic objectives are put into statute. It marks the next chapter for the UK Infrastructure Bank as it continues to develop operationally. Since the summer of 2021, when the UKIB became operational, 10 deals worth close to £1.1 billion have been completed, including providing financing for a new £500 million fund that could double the amount of subsidy-free solar power in the UK.

The UKIB has a transformative potential that I know is recognised and supported on both sides of the House. I would like to thank my immediate predecessors, my right hon. Friend the Member for Salisbury (John Glen) and my hon. Friend the Member for North East Bedfordshire (Richard Fuller). I also thank the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) and her colleague the hon. Member for Hampstead and Kilburn (Tulip Siddiq) for their appropriate challenge, but also for the support they have given the Bill.

I would also like to put on record my sincere thanks and the best wishes of this House to the UKIB, including its chair, Chris Grigg, and its chief executive, John Flint, who have both done such great work in establishing the UKIB to date. Finally, as is customary, I would like thank my Bill team—Alex McBeath, Milly Rainford and Lorna Cosgrave—along with those in my private office at the Treasury, who have supported me ably throughout this process.

I am honoured to have played a part in taking this Bill—one that will deliver meaningful, material benefits for our country and our constituents—through the House of Commons, and I commend it to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed, with amendments.

Non-domicile Tax Status

Andrew Griffith Excerpts

Tuesday 31st January 2023 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

Although we may not agree, it is always a pleasure to hear the passion that the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) brings to her role.

The public expect us to have a plan for the economy, for growth and for the country, and we do. As the Prime Minister has said, we have five priorities that deliver on the people’s priorities: to cut inflation by half, to grow the economy, to get the national debt down, to cut NHS waiting lists and to stop small boats crossing the channel. As we deliver against these pledges, we will move towards a better future, with our economy growing faster and the benefits shared across the whole of our country.

Just as we did in the pandemic, we will continue to support the most vulnerable. That is why we uprated benefits by inflation—an £11 billion commitment. It is why we honoured the triple lock on pensions—that is billions more on supporting pensioners on low incomes. It is why, when Putin’s war on Ukraine hiked the global cost of energy, we delivered a generous subsidy to cushion households’ energy bills: £900 for each household last year and £500 this year, on top of a £900 payment for everyone on means-tested benefits.

The Opposition do not want to dwell on this because they recognise no limits when it comes to spending other people’s money. Opposition Members who say we are prioritising the wealthiest simply need to look again. At the same time, we need to make sure that our economy is fertile for growth, and it would be wrong to make decisions based on what is politically expedient at the cost of public services. As the Chancellor has said, it is important to look at any proposals on non-doms in the light of the true impact on the public finances.

I will respond to some of the points Members made shortly, but let me first remind the House that it is well established, in particular in developing policy, that Ministers of the Crown must be able to receive free and frank advice from officials, especially when that advice is market sensitive. It is entirely right that Parliament hears Government decisions first, but that should be through the established process of a fiscal event, when the Government can set out their decisions on market-sensitive issues such as tax in an orderly fashion.

We started this debate with a demolition of the arguments put forward by the hon. Member for Ealing North (James Murray) by my right hon. Friend the Financial Secretary to the Treasury. My hon. Friend the Member for Aylesbury (Rob Butler) raised a valid point, to which we have yet to receive an answer, about why successive Labour Governments did not take action during their years in power. I am very happy to take an intervention if shadow Ministers would like to answer that right now.

My right hon. and learned Friend the Member for Northampton North (Michael Ellis), a master of the constitution, rightly observed that the motion is unconstitutional, irregular and injurious to the public interest. My hon. Friend the Member for South Cambridgeshire (Anthony Browne), with his deep knowledge of these matters, reminded us that 35 countries have similar schemes. He also reminded us a number of times during the debate about the Labour party using this debate, once again, to restate its credentials as the party of envy. Labour Members have not learned and they have not changed.

My hon. Friend the Member for Newcastle-under-Lyme (Aaron Bell) reminded us of how we on this side of the House have taken millions of people out of tax entirely, with an increase in the rate of the personal allowance from £6,500 when we took office to £12,500 today. My hon. Friend the Member for Amber Valley (Nigel Mills) gave us his own view that he sees a case for reform in this area.

People across the country are looking to us in this House to get inflation down, cut debt and unleash growth, and we have a plan to do so. It is an inflating-cutting plan that will see the economy growing, debt falling, NHS waiting lists cut and small boats stopped—that is what we will deliver. Our plan is rooted in economic stability and the prudent management of our finances. Not for us the shadow Chancellor’s spend now, pay later economics. In the three weeks since Labour Members promised no “big Government chequebook” they have made £45 billion of unfunded spending commitments. That is why her predecessor, the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), left us a note saying, “I’m afraid there is no money.”

The right hon. Member for Leeds West (Rachel Reeves) has been busy. One minute she is hanging out with masters of the universe in Davos, the next making promises to masters of the unions in Deptford. From glühwein to white wine, the only common denominator is spending more of other people’s money. But we will not be distracted from our important task, and we will not indulge in this sort of procedural politics from the Opposition, which I regret is the sort of thing that lowers the esteem of this House. Disregarding established precedents while prejudicing the process of consideration would not be in the public interest, especially when we have just weeks to wait until the fiscal event. Instead, our focus is delivering on the people’s priorities, and delivering a Budget to help achieve them. That is what we are focused on, and that is why Conservative Members oppose this desperate and distracting motion.

Question put.

Cryptocurrency Regulation

Andrew Griffith Excerpts

Wednesday 25th January 2023 Westminster Hall

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve under your chairmanship, Ms McVey. I congratulate the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) on securing this debate on crypto regulation, which follows the first debate on cryptoassets, led by her fellow party member the hon. Member for West Dunbartonshire (Martin Docherty-Hughes) in September last year. The hon. Lady is absolutely right that this is an important sector for innovation, and I commend her and the crypto and digital assets all-party parliamentary group for their work to upskill Members of this House in this important emerging area.

My goal is simple: we want the UK to be the home of an open, well regulated and technologically advanced sector. As the hon. Lady said, recent events have highlighted some vulnerabilities in the cryptoassets sector, but it is a big sector. We have seen how FTX’s collapse has impacted some consumers, but as with any emerging technology—and this technology is at an emerging stage for all its myriad potential uses—there will be risk. We understand the importance of risk in the system and that, regrettably, that brings failures as much as success and opportunity. That is part of the process of change itself.

The hon. Lady talked about how cryptocurrencies could be an area of Brexit opportunity, and because we have taken back control of our rulebook, this House—importantly—has the opportunity as well as the obligation to bring forward regulations. In that context, she talked about being the mum of a 14-year-old, all the potential jobs and the advice that she would give. Clearly, this is a world that has captured the imagination of young people. Anything we can do to get our young people to equip themselves with more STEM skills is very positive.

The hon. Lady also talked about the positive benefits in a sector in which, owing to its nature as a nascent and emerging sector, people are not always clear about its use cases. She made a powerful point about the use case in Ukraine and allowing that financial system to continue to work. Government policy is that we will introduce timely, sensible and balanced regulation to allow the safe use of the technology and allow participants in the sector to understand with certainty the environment in which they operate.

On the potential economy, the hon. Lady might be familiar with the work done by PricewaterhouseCoopers that estimates that blockchain technology, which underlies what is often referred to as crypto, could boost the UK economy by £57 billion by 2030. That is a sizeable opportunity and we are keen for the UK to seize its fair share. She talked about other jurisdictions that have introduced regulation, and it is right that we learn from them and use the opportunity to perfect our own regulation, but obviously we must ensure that we capture—if that is the right word—a fair share of the opportunities.

The fintech sector is a great success story for both the City of London and the wider UK economy, and last year the UK attracted more fintech investment than the next 13 European countries combined, so we have a real lead. Natural extensions of that sector are crypto firms and cryptoassets—people working with blockchain. It is important, therefore, that the regulations we introduce facilitate that.

The hon. Lady rightly raised the role of our regulators and their speed and agility. I will write to her, but will share now the figures that I have. I understand from the Financial Conduct Authority that 41 such firms are registered in the UK. Obviously, the FCA has its own regulations around that—the hurdles that firms have to clear—and I am interested in general, as we seek to have an agile and proportionate financial regulatory system, in our regulators moving at the right pace.

There are measures in the Financial Services and Markets Bill more generally to encourage the regulators—indeed, to compel them—to be more transparent about their key operating statistics, such as those in respect of speed. I think the hon. Lady talked about the number of authorisations and the average processing time for authorisations, which I hear about widely across the financial services sector and know is a focus for the FCA. It is important that it is: we cannot have a financial system that is competitive internationally if it has a slow latency and if it does not operate at speed. I share the hon. Lady’s concern, and if there are any additional measures I can obtain, I will of course write to her.

The hon. Lady talked about the importance of engagement between Ministers and the sector. I want to assure her that during my relatively short time in this role I have held a desire for broad and deep engagement. This is a really big sector. She might be interested to know that rather than having a standing council, as it were—Governments sometimes set up a group of 12 anointed figures and all the engagement is there—I want to be much more agile and to engage with a much broader range of people. My undertaking is to have six roundtables with the sector, but with a variety of sector participants, during calendar year 2023. That will build on the three roundtables that I have already held with the sector in the first few months since my appointment. That is a real commitment; this area rewards a lot of time being spent on it.

I assure the hon. Lady, members of the all-party group and industry bodies that I want to take an evidence-based and proportionate approach to regulation. That is something to which we all aspire. It is not helpful in any domain for people to make sweeping statements without offering facts and proof.

I hope I have addressed most of the hon. Lady’s points. There is one final point on which I wish to offer clarity: where we go from here. I do not have the precise date, but I assure the hon. Lady that the Government will very soon come forward with our consultation paper on the regulatory approach to cryptoassets. That will be a matter of weeks, not months, but I do not have the precise date. I urge people to get ready to respond to that paper. We will engage on the back of it, because it is of course just the next step in the process. The purpose of the consultation is that we have proportionate regulation, that we do it right and that it is practitioner led.

Of course, the flipside is that consultative processes sometimes makes things take a little longer than one might wish in a fast-moving domain. In order to get the balance right, I urge those with views to be ready to advocate them. They should be assured that they have a Minister and a Government who are keen to see the sector grow and to harness the benefits for the United Kingdom and the hon. Lady’s constituents. I would be delighted to return to update this place frequently on the progress of this exciting new sector.

Question put and agreed to.

Mortgage Guarantee Scheme Extension: Contingent Liability

Andrew Griffith Excerpts

Tuesday 20th December 2022 Written Statements

[The Economic Secretary to the Treasury (Andrew Griffith)]

Today I can inform the House that the mortgage guarantee scheme will be extended by an additional year to continue to support homebuyers and movers with smaller deposits. The scheme will now close to new accounts on 31 December 2023.

HM Treasury launched the mortgage guarantee scheme in April 2021, which provides a guarantee to participating lenders across the UK who offer mortgages to first-time buyers and existing homeowners with a deposit as small as 5% on homes with a value of up to £600,000. Since its launch last year, the scheme has successfully restored the availability of 91 to 95% loan-to-value mortgage products, directly supporting over 24,000 households to buy their homes—85% of which were by first-time buyers. Since 2010, more than 687,000 households have been helped into home ownership through Government schemes.

While the mortgage guarantee scheme was originally planned to close to new mortgage applications on 31 December 2022, HM Treasury has decided to extend the scheme by an additional year to continue to provide lenders with the confidence to offer low-deposit mortgages to consumers.

Guarantees issued under the scheme are valid for up to seven years after the mortgage is originated. Participating lenders pay HM Treasury a fee for each mortgage entered into the scheme. This is set so that expected claims against the guarantee should be covered by revenue from the fee.

In order to ensure products remain available, HM Treasury will therefore be extending the duration of the Government’s contingent liability for an additional year beyond its planned closing date of 31 December 2022. The Department is also reducing the maximum contingent liability cap from £3.9 billion to £3.2 billion, which remains set at a level so as not to constrain the ability of lenders to access the scheme. This liability would only materialise if the sum of commercial fees paid by lenders would not be sufficient to cover calls on the guarantee.

Authority for any expenditure required under this liability will be sought through the normal procedure. HM Treasury has approved this proposal.

[HCWS471]

Life Insurance Taxation

Andrew Griffith Excerpts

Thursday 15th December 2022 Written Statements

[The Economic Secretary to the Treasury (Andrew Griffith)]

The Government are announcing the following measure— of which there are two components—which will take immediate effect from today.

The first part of the measure applies to re-insurers of a specific type of long-term insurance business known as basic life assurance and general annuity business (BLAGAB). It addresses a possible tax mismatch in the life insurance rules where re-insurance precedes a transfer of BLAGAB. In this situation the measure eliminates the possibility of a mismatch by classifying the re-insured business as BLAGAB in the hands of the re-insurer. This will protect Exchequer revenues needed to fund vital public services.

The second part of the measure addresses an industry concern that the current scope of section 92 of the Finance Act 2012 may be unnecessarily wide and is blocking commercial transactions. It amends that section so that it does not apply where substantially all the insurance risks of a book of BLAGAB are assumed by a re-insurer.

The draft legislation will be published today on gov.uk: https://www.gov.uk/government/publications/re-insurance-in-the-course-of-transfers-of-long-term-business. It will be accompanied by a tax information and impact note and an explanatory note. A copy of the legislation will also be deposited in the Libraries of both Houses.

[HCWS453]

Financial Services and Markets Bill

Andrew Griffith Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[The Economic Secretary to the Treasury (Andrew Griffith)]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

Amendment (a) to new clause 17, after “mentioned in paragraphs (a) to (ia) of paragraph 11(1);” insert—

“(aa) the effect of the Financial Services and Markets Act 2023 on financial stability, and potential risks to financial stability, in the UK;

(ab) an assessment of the delivery of the FCA’s objectives in the previous year;

(ac) an assessment of measures which could improve the delivery of the FCA’s objectives in the next year;”

Amendment (b) to new clause 17, after “mentioned in paragraphs (a) to (f) of paragraph 19(1);” insert—

“(aa) the effect of the Financial Services and Markets Act 2023 on financial stability, and potential risks to financial stability, in the UK;

(ab) an assessment of the delivery of the PRA’s objectives in the previous year;

(ac) an assessment of measures which could improve the delivery of the PRA’s objectives in the next year;”

Government new clause 18—Composition of panels.

Government new clause 19—Consultation on rules.

Government new clause 20—Unauthorised co-ownership AIFs.

New clause 1—National strategy on financial fraud—

‘(1) The Treasury must lay before the House of Commons a national strategy for the purpose of detecting, preventing and investigating fraud and associated financial crime within six months of the passing of this Act.

(2) In preparing the strategy, the Treasury must consult—

(a) the Secretary of State for the Home Office,

(b) the National Economic Crime Centre,

(c) law enforcement bodies which the Treasury considers relevant to the strategy,

(d) relevant regulators,

(e) financial services stakeholders,

(f) digital platforms, telecommunications companies, financial technology companies, and social media companies.

(3) The strategy must include arrangements for a data-sharing agreement involving—

(a) relevant law enforcement agencies,

(b) relevant regulators,

(c) financial services stakeholders,

(d) telecommunications stakeholders, and

(e) technology-based communication platforms,

for the purposes of detecting, preventing and investigating fraud and associated financial crime and, in particular, tracking stolen money which may pass through mule bank accounts or platforms operated by other financial services stakeholders.

(4) In this section “fraud and associated financial crime” includes, but is not limited to authorised push payment fraud, unauthorised facility takeover fraud, and online and offline identity fraud.

(5) In this section, “financial services stakeholders” includes banks, building societies, credit unions, investment firms, Electric Money Institutions, virtual asset providers and exchanges, and payment system operators.’

This new clause would require the Treasury to publish a national strategy for the detection, prevention and investigation of fraud and associated financial crime, after having consulted relevant stakeholders. The strategy must include arrangements for a data sharing agreement between law enforcement agencies, regulators and others to track stolen money.

New clause 2—Local community access to essential in-person banking services—

‘(1) The Treasury and the FCA must jointly undertake a review of the state of access to essential in-person banking services for local communities in the United Kingdom, and jointly prepare a report on the outcome of the review.

(2) “Essential in-person banking services” include services which are delivered face-to-face and which local communities require regular access to. These may include services provided in banks, banking hubs, or other service models.

(3) The report mentioned in subsection (1) must be laid before the House of Commons as soon as practicable after the review has been undertaken.

(4) The report mentioned in subsection (1) must propose a minimum level of access to essential in-person banking services which must be provided by banks and building societies in applicable local authority areas in the United Kingdom, for the purpose of ensuring local communities have adequate access to essential in-person banking services.

(5) The applicable local authority areas mentioned in subsection (4) are local authority areas in which, in the opinion of the FCA, local communities have a particular need for the provision of essential in-person banking services.

(6) In any applicable local authority area which, according to the results of the review undertaken under subsection (1) falls below the minimum level of access mentioned in subsection (4), the FCA may give directions for the purpose of ensuring essential in-person banking services meet the minimum level of access required by subsection (4).

(7) A direction under subsection (6) may require a minimum level of provision of essential in-person banking services through mandating, for example—

(a) a specified number of essential in-person banking services within a geographical area, or

(b) essential in-person banking services to operate specific opening hours.’

This new clause would require the Treasury and FCA to conduct and publish a review of community need for, and access to, essential in-person banking services, and enable the FCA to ensure areas in need of essential in-person banking service have a minimum level of access to such services.

New clause 3—Essential banking services access policy statement—

‘(1) The Treasury must lay before the House of Commons an essential banking services access policy statement within six months of the passing of this Act.

(2) An “essential banking services access policy statement” is a statement of the policies of His Majesty’s Government in relation to the provision of adequate levels of access to essential in-person banking services in the United Kingdom.

(3) “Essential in-person banking services” include services which are delivered face-to-face, and may include those provided in banks, banking hubs, or other service models.

(4) The policies mentioned in sub-section (2) may include those which relate to—

(a) ensuring adequate availability of essential in-person banking services;

(b) ensuring adequate provision of support for online banking training and internet access, for the purposes of ensuring access to online banking; and

(c) expectations of maximum geographical distances service users should be expected to travel to access essential in-person banking services in rural areas.

(5) The FCA must have regard to the essential banking services access policy statement when fulfilling its functions.’

This new clause would require the Treasury to publish a policy statement setting out its policies in relation to the provision of essential in-person banking services, including policies relating to availability of essential in-person banking services, support for online banking, and maximum distances people can expect to travel to access services.

New clause 4—FCA duty to report on mutual and co-operative business models—

‘(1) The FCA must lay before Parliament a report as soon as practicable after the end of—

(a) the period of 12 months beginning with the day on which this Act is passed, and

(b) every subsequent 12-month period,

on how it considers the specific needs of mutual and co-operative financial services providers and other relevant business models when discharging its regulatory functions.

(2) The “specific needs” referred to in subsection (1) must include the needs of mutual and co-operative financial services providers to have a level playing field with financial services providers which are not mutuals or co-operatives.

(3) The “mutual and co-operative financial services providers and other relevant business models” referred to in subsection (1) may include—

(a) credit unions,

(b) building societies,

(c) mutual banks,

(d) co-operative banks, and

(e) regional banks.’

This new clause would require the FCA to report annually on how they have considered the specific needs of mutual and co-operative financial services.

New clause 5—PRA duty to report on mutual and co-operative business models—

‘(1) The FCA must lay before Parliament a report as soon as practicable after the end of—

(a) the period of 12 months beginning with the day on which this Act is passed, and

(b) every subsequent 12-month period,

on how it considers the specific needs of mutual and co-operative financial services providers and other relevant business models when discharging its regulatory functions.

(2) The “specific needs” referred to in subsection (1) must include the needs of mutual and co-operative financial services providers to have a level playing field with financial services providers which are not mutuals or co-operatives.

(3) The “mutual and co-operative financial services providers and other relevant business models” referred to in subsection (1) may include—

(a) credit unions,

(b) building societies,

(c) mutual banks,

(d) co-operative banks, and

(e) regional banks.’

This new clause would require the FCA to report annually on how they have considered the specific needs of mutual and co-operative financial services.

New clause 6—Updated Green Finance Strategy—

‘(1) The Treasury must lay before the House of Commons an updated Green Finance Strategy within three months of the passing of this Act.

(2) The strategy must include—

(a) a Green Taxonomy, and

(b) Sustainability Disclosure Requirements.

(3) In preparing the strategy, the Treasury must consult—

(a) financial services stakeholders,

(b) businesses in the wider economy,

(c) the Secretary of State for Business, Energy and Industrial Strategy, and

(d) the Secretary of State for Work and Pensions.

(4) In this section a “Green Taxonomy” means investment screening criteria which classify which activities can be defined as environmentally sustainable including, but not limited to—

(a) climate change mitigation and adaptation,

(b) sustainable use and protection of water and marine resources,

(c) transitions to a circular economy,

(d) pollution prevention and control, and

(e) protection and restoration of biodiversity and ecosystems.

(5) In this section “Sustainability Disclosure Requirements” are the requirements placed on companies, including listed issuers, asset managers and asset owners, to report on their sustainability risks, opportunities and impacts.’

This new clause would require the Treasury to publish an updated Green Finance Strategy. This must include a Green Taxonomy and Sustainability Disclosure Requirements.

New clause 7—Access to cash: Guaranteed minimum provision—

‘(1) The Treasury must, by regulations, make provision to guarantee a minimum level of access to free of charge cash access services for consumers across the United Kingdom.

(2) The minimum level of access referred to in subsection (1) must be included in the regulations.

(3) Regulations under this section shall be made by statutory instrument, and may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.’

New clause 8—Stewardship reporting requirements for occupational pension schemes—

‘(1) Section 36 of the Pensions Act 1995 (Choosing investments) is amended as follows.

(2) In subsection (1) after “(4)” insert “and, for relevant schemes, (4A)”.

(3) After subsection (4), insert—

“(4A) The trustees of relevant schemes must publish information regarding their stewardship activities. In doing so they must have regard to, amongst other matters, the scheme’s—

(a) purpose, culture, values and strategy;

(b) governance structures and processes;

(c) conflicts of interest policy;

(d) engagement strategy, including escalation steps;

(e) aggregate statistics on total engagement activity;

(f) thematic engagement priorities; and

(g) engagement outcomes.”

(4) After subsection (6), insert—

“(6A) For the purposes of this section—

(a) a “relevant scheme” means a scheme with £5bn or more in relevant assets,

(b) “relevant assets” is to be calculated in accordance with methods and assumptions prescribed in regulations.”’

This new clause raises the baseline standard of stewardship for large institutional investors beyond the minimum standards set by the UK’s implementation of the Shareholder Rights Directive, drawing on the Financial Reporting Council’s Stewardship Code and ShareAction’s Best Practice Engagement Reporting Template.

New clause 9—Stewardship reporting requirements for certain investors—

‘(1) The FCA may make rules requiring some or all of those managing investments to publish information on their stewardship activities. In doing so they must have regard to, amongst other matters—

(a) purpose, culture, values, business model and strategy;

(b) governance structures and processes;

(c) conflicts of interest policy;

(d) engagement strategy, including escalation steps;

(e) aggregate statistics on total engagement activity;

(f) thematic engagement priorities; and

(g) engagement outcomes.

(2) The FCA may make rules to clarify the definition of “the most significant votes” in rule 3.4.6 of the systems and controls section of the FCA Handbook.’

This new clause would enable the FCA to make rules raising the baseline standard of stewardship for large institutional investors beyond the minimum standards set by the UK’s implementation of the Shareholder Rights Directive, drawing on the Financial Reporting Council’s Stewardship Code and ShareAction’s Best Practice Engagement Reporting Template. It would also allow the FCA to define and monitor “significant votes”.

New clause 10—Consumer Panel duty to report to Parliament—

‘(1) FSMA 2000, as amended by Section 6 of the Financial Services Act 2012 and Section 132 of the Financial Services (Banking Reform) Act 2013, is amended as follows.

(2) At the end of section 1Q, insert—

“(7) The Consumer Panel must lay an annual report before Parliament evaluating the FCA’s fulfilment of its statutory duty to protect consumers, including comments on—

(a) the adequacy and appropriateness of the FCA’s use of its regulatory powers;

(b) the measures the FCA has taken to protect vulnerable consumers, including pensioners, people with disabilities, and people receiving forms of income support; and

(c) the FCA’s receptiveness to the recommendations of the Consumer Panel.”’

This new clause would introduce a further level of Parliamentary scrutiny of the work of the FCA to protect consumers by requiring the Financial Services Consumer Panel to lay an annual report before Parliament outlining its views on the FCA’s fulfilment of its statutory duty to protect consumers.

New clause 11—Personalised financial guidance: power to make regulations—

‘(1) The Treasury may by regulations make provision for UK citizens to access personalised financial guidance from appropriately regulated financial services firms, for the purposes of supporting them to make decisions which improve their financial sustainability.

(2) The “UK citizens” referred to in sub-section (1) include, in particular, UK citizens who are unlikely to have access to financial advice (provided in accordance with Chapter 12 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001).

(3) In this section, “personalised financial guidance” means a communication—

(a) that is made to a person in their capacity as an investor or potential investor, or in their capacity as agent for an investor or a potential investor;

(b) which constitutes a recommendation to them to do any of the following (whether as principal or agent)—

(i) buy, sell, subscribe for, exchange, redeem, hold or underwrite a particular investment which is a security, structured deposit or a relevant investment; or

(ii) exercise or not exercise any right conferred by such an investment to buy, sell, subscribe for, exchange or redeem such an investment; and

(c) that is—

(i) based on a consideration of the circumstances of that person; and

(ii) not explicitly presented as suitable for the person to whom it is made.

(4) The provision that may be made by regulations under this section includes provisions—

(a) relating to the provision of financial advice;

(b) relating to suitability requirements under MiFID;

(c) conferring powers, or imposing duties, on a relevant regulator (including a power to make rules or other instruments).

(5) The power to make regulations under this section includes power to modify legislation.

(6) The power under subsection (5) includes power to modify the definition of “personalised financial guidance” in subsection (2).

(7) Regulations made under this section, and which modify only the following kinds of legislation are subject to the negative procedure—

(a) EU tertiary legislation;

(b) subordinate legislation that was not subject to affirmative resolution on being made.

(8) Regulations under this section to which subsection (7) does not apply are subject to the affirmative procedure.

(9) Before making regulations under this section, the Treasury must consult the FCA.

(10) In this section—

“legislation” means primary legislation, subordinate legislation and retained direct EU legislation;

“MiFID” means Regulation (EU) 2017/565 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive.’

New clause 12—Requirement to publish regulatory performance information on new authorisations—

‘(1) The FCA and PRA must each lay before Parliament a report on their regulatory performance as soon as practicable after the end of—

(a) the period of six months beginning with the day on which this Act receives Royal Assent, and

(b) each subsequent quarter.

(2) A report under this section must include analysis of data on—

(a) the number of new applications for authorisation made to each regulator during the reporting period, with a breakdown by authorisation type;

(b) the rates of approval for applications for authorisation by each regulator, with a breakdown by authorisation type;

(c) the average length of time taken from application to final authorisation decision by each regulator;

(d) the FCA or PRA‘s assessment of the time and cost incurred by applicants to comply with information requirements for authorisation; and

(a) such other matters as the Treasury considers appropriate.’

This new clause requires both regulators to publish regular reports to Parliament on their regulatory performance for new applicants for regulation.

New clause 13—Requirement to publish regulatory performance information on authorised firms—

‘(1) The FCA must lay before Parliament a report on its regulatory performance as soon as practicable after the end of—

(a) the period of six months beginning with the day on which this Act receives Royal Assent, and

(b) each subsequent quarter.

(2) A report under this section must include the average length of time taken from the initial submission of an application for authorisation by an applicant to the issuing of a final decision by the FCA for each of the following regulatory responsibilities—

(a) approved persons;

(b) change in control;

(c) variation of permission;

(d) waivers and modifications that alter compliance obligations.’

This new clause requires the FCA to publish regular reports to Parliament on its regulatory performance for existing authorised entities and persons.

New clause 14—Determination of applications—

‘(1) The Financial Services and Markets Act 2000 is amended as follows.

(2) After section 61(2) insert—

“(2ZA) In determining the application, the regulator must—

(a) assign a new application to a case handler within five working days of the application being received;

(b) complete an initial application review within ten working days of allocation to a case handler; and

(c) make no requests for additional information after a period of fifteen working days from the receipt of the application.

(2ZZA) The regulators must publish, on an annual basis, monitoring data relating to—

(a) the proportion of cases which require escalation to sponsoring firms, including summary trend data on the reasons for escalation;

(b) the average time taken to assign a case handler; and

(c) the average number of days it takes to complete determination of an application.’

This new clause would add to the regulators’ authorisation KPIs outlined in the Financial Services and Markets Act 2000 and require them to publish monitoring data related to the determination of authorisations.

New clause 15—Regulators’ duty to report on competitiveness and growth objective—

‘(1) The FCA and PRA must each lay before Parliament a report as soon as practicable after the end of—

(a) the period of 12 months beginning with the day on which this Act receives Royal Assent, and

(b) every subsequent 12-month period,

on how they consider that they have facilitated the international competitiveness of the economy of the United Kingdom and its growth in the medium to long term.

(2) Reports under this section must include analysis of data on the following—

(a) steps taken to simplify regulatory rulebooks and frameworks;

(b) the number of new market entrants to the UK;

(c) new regulations introduced in the previous twelve months;

(d) an assessment of the impact of the new regulations to UK competitiveness;

(e) comparative analysis of the number of new authorisations in the UK and other international jurisdictions in the previous twelve months;

(f) comparative analysis of product and service innovations introduced in the UK and other international jurisdictions in the previous twelve months; and

(g) such other matters as the Treasury may from time to time direct.’

This new clause would require both the FCA and PRA to each publish an annual report setting out how they have facilitated international competitiveness and growth against a range of data and analysis requirements.

New clause 16—Regulatory principles to be applied by both regulators: proportionality principle—

‘(1) The Financial Services and Markets Act 2000 is amended as follows.

(2) In section 3B(1)(b), leave out from “benefits,” to end and insert “taking into consideration the nature of the service or product being delivered, the nature of risk to the consumer, whether the cost of implementation is proportionate to that level of risk and whether the burden or restriction enhances UK international competitiveness.”’

This new clause would amend the existing regulatory principle for both regulators and require them nature of and risk to the consumer, and the service or product being delivered, must be taken into account when imposing a new burden or restriction.

New clause 21—Prudential capital requirements for specified financial institutions—

‘(1) Within six months of the passing of this Act, the Treasury must by regulations set prudential capital requirements for specified financial institutions.

(2) Regulations under this section must require financial institutions to hold in reserve £1 for every £1 used to finance assets connected with fossil fuel activities, which is liable for potential loss due to the climate risk exposure of the assets.

(3) In this section “fossil fuel activities” means the extraction, production, transportation, refining and marketing of crude oil, natural gas or thermal coal, as well as any fossil-fuel fired power plants, unless covered by an exemption.’

This new clause would give the Treasury the power to make regulations requiring financial institutions to hold capital in reserve to reflect the climate risk exposure of assets connected with fossil fuel activities.

New clause 22—FCA: Regard to financial inclusion in consumer protection objective—

‘(1) FSMA 2000 is amended as follows.

(2) In section 1C (The consumer protection objective), after subsection (2)(c) insert—

“(ca) financial inclusion;””.

New clause 23—FCA duty to report on financial inclusion—

“(1) The FCA must lay before Parliament a report, as soon as practicable after the end of—

(a) the period of 12 months beginning with the day on which this Act is passed, and

(b) every subsequent 12-month period,on financial inclusion in the UK.

(2) A report under this section must include—

(a) an assessment of the state of financial inclusion in the UK;

(b) details of any measures the FCA has taken, or is planning to take, to improve financial inclusion in the UK;

(c) developments which the FCA considers could significantly impact on financial inclusion in the UK; and

(d) any recommendations to the Treasury which the FCA considers may promote financial inclusion in the UK.’

New clause 24—Rules relating to forest risk commodities—

‘(1) FSMA 2000 is amended as follows.

(2) After section 19 (The general prohibition) insert—

“19A Specific requirements regarding forest risk commodities

(1) A person must not carry on a regulated activity in the United Kingdom that may directly or indirectly support a commercial activity in relation to a forest risk commodity or a product derived from a forest risk commodity, unless relevant local laws were complied with in relation to that commodity.

(2) A person that intends to carry on a regulated activity that may directly or indirectly support a commercial activity in relation to a forest risk commodity or a product derived from a forest risk commodity, shall establish and implement a due diligence system in relation to that regulated activity.

(3) In this section, “due diligence system” means a system for—

(a) identifying and obtaining information about the commercial activities of any beneficiary of the regulated activity and of their group regarding the use of a forest risk commodity,

(b) assessing the risk that relevant local laws were not complied with in relation to that commodity, and

(c) mitigating that risk.

(4) A person that carries on a regulated activity in the United Kingdom that directly or indirectly supports a commercial activity in relation to a forest risk commodity or a product derived from a forest risk commodity shall be subject to—

(a) the reporting requirements under paragraph 4 of Schedule 17 of the Environment Act in relation to the due diligence system required under subsection (2) of this section, and

(b) Part 2 of Schedule 17 of the Environment Act as though they are a person to whom Part 1 of that Schedule applies.

(5) Terms used in this section that are defined in Schedule 17 of the Environment Act shall have the meaning given to them in that Schedule.”’

New clause 25—Long term economic resilience and prosperity objective—

‘(1) FSMA 2000 is amended as follows.

(2) In section 1B (FCA’s general duties)—

(a) in subsection (2) leave out “function well” and insert “deliver long term economic resilience and prosperity”;

(b) in subsection (3) for paragraph (c) substitute—

“(c) the climate safety objective (see section 1E);

(d) the nature protection objective (see section 1F).”

(3) For section 1E (The competition objective) substitute—

“1E The climate safety objective

The climate safety objective is: facilitating the net UK carbon emissions target in section 1 of the Climate Change Act 2008, and the 1.5 degrees temperature goal of the Paris Agreement.

1F The nature objective

The nature objective is: facilitating alignment with halting and reversing biodiversity loss by 2030.”’

This new clause would make the FCA’s strategic objective ensuring that the relevant markets deliver long term economic resilience and prosperity, remove the competition operational objective and introduce two new operational objectives; climate safety and nature protection.

New clause 26—Prohibited regulated activity: new fossil fuel developments—

‘(1) A UK bank, or person acting on behalf of a UK bank, may not carry on a regulated activity where the carrying out of the activity would have the effect of providing financial investment in, or facilitating the financing of, new fossil fuel developments.

(2) In this section—

(a) “new fossil fuel developments” includes—

(i) any activity, in the UK or elsewhere, which enables or contributes to the enabling of, the extraction, processing and distribution of fossil fuels, and

(ii) the construction, in the UK or elsewhere, of fossil fuel-powered electricity generation;

(b) “fossil fuels” has the same meaning as in section 32M (Interpretation of sections 32 to 32M) of the Electricity Act 1989;

(c) “UK bank” has the same meaning as in section 2 (Interpretation: “bank”) of the Banking Act 2009.

(3) The FCA may impose sanctions against the relevant bank, where the prohibition in subsection (1) is contravened.

(4) The sanctions mentioned in subsection (3) includes—

(a) the imposition of a penalty of such amount as the FCA considers appropriate;

(b) suspension of variable components of remuneration;

(c) suspension of dividend pay-outs;

(d) removal of access to central bank funding; and

(e) removal of permission to carry on regulated activities.

(5) This section shall come into force on 31 December 2023.’

This new clause would prohibit banks from conducting regulated activity which may enable new fossil fuel developments from December 2023 onwards, and give the FCA powers to impose certain sanctions for non-compliance.

New clause 27—Refusal to provide services for reasons connected with freedom of expression—

‘(1) No payment service provider providing a relevant service (the “provider”) may refuse to supply that service to any other person (the “customer”) in the United Kingdom if the reason for the refusal is significantly related to the customer exercising his or her right to freedom of expression.

(2) Where a customer has prominently and publicly exercised his or her right to freedom of expression, it is to be presumed that any refusal by a provider to supply a relevant service was significantly related to the customer exercising his or her right to freedom of expression unless the provider can provide a substantial basis for believing there was an alternative good and proper reason for the refusal.

(3) Where a customer has prominently and publicly exercised his or her right to freedom of expression and has been refused a relevant service by a provider on application by the customer, the FCA must within 5 working days issue an order to the provider immediately to recommence supply unless the FCA considers it clearly inappropriate to do so.

(4) An order issued pursuant to subsection (3) must last until the FCA is satisfied that there was or there has subsequently arisen an alternative good and proper reason for the refusal.

(5) Upon considering an application by the customer under subsection (3), where the FCA decides not to issue an order to the supplier, the FCA must give reasons in writing to the customer explaining its decision not to issue an order.

(6) Where the FCA is satisfied that there has been a breach by a provider of the obligation in subsection (1) or the failure to comply with an order issued pursuant to subsection (3), the FCA may impose a penalty on the provider of such an amount as it considers appropriate. The FCA may, instead of imposing a penalty on a provider, publish a statement censuring the provider.

(7) The FCA must within three months of the coming into force of this section prepare and arrange for publication of a statement of its policy with respect to—

(a) the circumstances the FCA will consider under subsection (3) in deciding whether it is clearly inappropriate to issue an order; and

(b) the imposition of penalties and statements of censure under subsection (6).

(8) A breach by a provider of the obligation in subsection (1) and the failure to comply with an order issued pursuant to subsection (3) are actionable at the suit of the customer, subject to the defences and other incidents applying to actions for breach of statutory duty.

(9) In this section—

(a) a “relevant service” means a service which is (in whole or in part) directed at users in the United Kingdom and constitutes—

(i) any service provided pursuant to any regulated activity; or

(ii) any service in relation to a payment system for the purposes of enabling the transfer of funds using the payment system as referred to in section 42(5) of the 2013 Act;

save for any service expressly excluded by regulations;

(b) a “payment service provider” has the same meaning as under section 42(5) of the 2013 Act;

(c) the right to freedom of expression has the same meaning as under Article 10 of the European Convention on Human Rights—

(i) save that it includes the right to campaign for or seek to protect the right to freedom of expression of others; and

(ii) save as excluded by regulations;

(d) “the 2013 Act” means the Financial Services (Banking Reform) Act 2013.

(10) Regulations under this section may be made pursuant to the provisions of section 428 of FSMA 2000 save that—

(a) before preparing regulations under this section, the Secretary of State must consult the FCA and such other persons as the Secretary of State considers appropriate; and

(b) they must be adopted using the affirmative procedure before Parliament.’

New clause 28—Regulation of buy-now-pay-later firms—

‘(1) Within 28 days of the passing of this Act, the Secretary of State must by regulations make provision for—

(a) buy-now-pay-later credit services, and

(b) other lending services that have non-interest-bearing elements

to be regulated by the FCA.

(2) These regulations must include measures which—

(a) ensure all individuals accessing services mentioned in sub-section (1) have access to the Financial Services Ombudsman,

(b) ensure that individuals applying for services mentioned in sub-section (1) are subject to credit checks prior to the service being approved, and

(c) ensure that individuals accessing services mentioned in paragraph (1) are protected by Section 75 of the Consumer Credit Act.’

This new clause would bring the non-interest-bearing elements of bring buy-now-pay-later lending and similar services under the regulatory ambit of the FCA, as proposed by the Government consultation carried out in 2022.

New clause 29—Cost benefit analyses to include assessments of economic crime risks—

‘(1) FSMA 2000 is amended as follows.

(2) In section 138I(7), at end insert—

“(c) an assessment of economic crime risks posed by the proposed rules”’.

This new clause would require cost-benefit analyses to include assessments of the risk of economic crime arising from the proposed rules.

New clause 30—Establishment of Financial Regulator’s Supervision Council—

‘(1) The Secretary of State must, within six months of this Bill receiving Royal Assent, make provision for the establishment of a body to be known as the Financial Regulator’s Supervision Council (“FRSC”).

(2) The role of the body established under subsection (1) is to provide independent scrutiny and oversight of the work of the FCA and its fulfilment of its duties and responsibilities, particularly its consumer protection objective.

(3) The responsibilities of the body shall include, but not be limited to—

(a) overseeing the performance of the FCA from a consumer perspective, including undertaking annual appraisals and commissioning or undertaking periodic reviews as appropriate; and

(b) appointing, reviewing annually the performance of and, where appropriate, dismissing—

(i) the Chair and Chief Executive of the FCA (jointly with HM Treasury);

(ii) the non-Executive Directors of the FCA appointed by the Department for Business, Energy and Industrial Strategy;

(iii) Members and Chair of the Financial Services Consumer Panel;

(iv) the Financial Regulators’ Complaints Commissioner;

(v) the directors of the Financial Ombudsman Service and its Independent Assessor;

(vi) the directors of the Financial Services Compensation Scheme; and

(vii) such employees as the FRSC requires to perform its statutory role.

(4) The body is to be funded by a 1% levy on the FCA’s revenue.

(5) Membership of the body shall be selected through open competition and must include individuals representing the interests of financial services consumer groups.

(6) The Secretary of State may by regulations, following consultation with consumer groups, make further provision for the body’s responsibilities, powers, constitution and membership.

(7) Any reports published by the body must be laid before Parliament.’

New clause 31—Regulators’ duty of care—

‘(1) Individuals and organisations undertaking activities within the remit of the FCA and PRA shall owe a duty of care to consumers.

(2) The “duty of care” means an obligation to act towards consumers with a reasonable level of watchfulness, attention, caution and prudence.

(3) An individual or organisation in breach of this duty of care may be subject to legal claims for negligence.’

New clause 32—Regulators’ immunity from civil damages action—

‘(1) Relevant regulators may be the subject of civil damages actions in cases where—

(a) a consumer has suffered material financial loss,

(b) the loss has occurred since 1 December 2001,

(c) the activity in the course of which the consumer suffered material financial loss is within the remit of the relevant regulator, and

(d) the relevant regulator was aware, or could reasonably be expected to have been aware, that the consumer would have been at risk of suffering financial loss and negligently failed to take sufficient action to prevent the consumer from suffering such loss.

(2) Any recommendations made by the investigator appointed under section 84(1)(b) of the Financial Services Act 2012 following the upholding of a complaint made against a regulator by a consumer who has suffered financial loss, which may include the providing of material financial redress, shall be considered binding on the regulator.

(3) The Limitation Act 1980 shall not apply in relation to any civil actions brought under this section until six years after this section has come into force.’

New clause 33—Reporting requirement: Green agenda—

‘(1) Within six months of the passing of this Act, and every twelve months thereafter, the PRA and FCA must jointly lay before the House of Commons a report setting out their assessment of—

(a) the ways in which the PRA and FCA have incentivised and promoted green finance for the period covered by the report,

(b) the impact of the UK financial system in incentivising green investment for the period covered by the report, and

(c) the ways in which the PRA and FCA have supported the Secretary of State’s ability to meet the duty set out is section 1 of the Climate Change Act 2008.

(2) For the purposes of this section, “green finance” means financial products or services which aim to reduce emissions, and enhance sinks of greenhouse gases, and aim to reduce vulnerability of, and maintain and increase the resilience of, human and ecological systems to negative climate change impacts.’

This new clause would place a requirement on the PRA and FCA to report on ways in which they have promoted and incentivised green finance and green investment.

New clause 34—Investment duties of occupational pension schemes—

‘(1) Section 36 of the Pensions Act 1995 (Choosing investments) is amended as follows.

(2) In subsection (1) remove “(4)” and insert “(4A)”.

(3) After subsection (4), insert—

“(4A) The trustees must act in the way they consider, in good faith, would be most likely to be for the benefit of the beneficiaries as a whole and to be fair as between the beneficiaries, including as between present and future beneficiaries and in doing so have regard (amongst other matters) to—

(a) the likely consequences of any decision in the long term,

(b) the impact of their investments on society and the environment,

(c) environmental, social and governance risks and opportunities (including, but not limited to, climate change),

(d) the desirability of the trustees maintaining a reputation for high standards of business conduct,

(e) the need to act fairly as between beneficiaries and members of the scheme, and

(f) in relation to investments that provide money purchase benefits, the views of beneficiaries and members of the scheme.

(4B) The trustees shall publish a policy statement of its understanding of benefit as relevant to its beneficiaries and of how it has regard to the matters in subsection 4A(a) to (d). The Secretary of State may make regulations regarding such policy statements.

(4C) The trustees shall report to beneficiaries the performance of the portfolio in delivering the benefit as defined in the policy statement and shall do this at the same time as it reports on the financial performance of the portfolio.

(4D) A fiduciary investor shall take all reasonable steps to ensure that all of its delegates and advisers comply with this section.”’

This amendment broadens the investment duties of trust-based pension schemes and FCA-authorised personal pension providers to require specified investors to make investment decisions in the “best interests” of beneficiaries.

New clause 35—Investment duties of personal pension providers—

‘(1) The Financial Services and Markets Act 2000 is amended as follows.

(2) After section 137FD insert—

“137FE FCA general rules: pension investment

(1) The FCA must make general rules requiring managers of some or all relevant pension schemes to invest the assets in the best interests of members of the scheme and in the case of a potential conflict of interest, in the sole interest of members and survivors. In doing so they must have regard (amongst other matters) to—

(a) the likely consequences of any decision in the long term,

(b) the impact of their investments on society and the environment,

(c) the desirability of the managers maintaining a reputation for high standards of business conduct, and

(d) the need to act fairly as between members of the scheme.

(2) The FCA may make general rules requiring managers of relevant pension schemes to report publicly on how they have met the requirement in sub-section (1)

(3) In this section “relevant pension scheme” means—

(a) a personal pension scheme within the meaning of an order under section 22, or

(b) a stakeholder pension scheme within the meaning of such an order.”’

This amendment broadens the investment duties of trust-based pension schemes and FCA-authorised personal pension providers to require specified investors to make investment decisions in the “best interests” of beneficiaries.

New clause 36—Duty to report fraud—

‘(1) Financial services providers must, upon the detection of fraudulent activity or suspected fraudulent activity, report such activity to a relevant investigating authority.

(2) Financial services providers must publish an annual report which includes information on levels of identified fraudulent activity and steps taken, or planned to be taken, to reduce and prevent such or further fraudulent activity.’

Government amendments 8 to 11.

Amendment 19, in clause 29, page 41, line 12, at end insert

‘, and also to financial inclusion.

‘(2A) For the purposes of this section, “financial inclusion” means the impact on those who might be prevented from accessing financial services as a result of the new rules made by either regulator, or from accessing them on the same terms as existed before the making of the new rules.’

Government amendments 12 and 13.

Amendment 1, in clause 40, page 54, line 29, at end insert—

‘(c) be provided with any information or data that the Panel requires in order to fulfil its duties;

(d) publish the agendas and minutes of meetings of the Panel; and

(e) make publicly available its recommendations in full including, but not limited to, the evidence base and analysis it used to make its recommendations, the assessed costs and benefits of the FCA’s activities and the range of representations made by Panel members regarding those recommendations.’

Amendment 2, page 54, line 36, at end insert

“at least two of whom must be representatives of FCA authorised firms.”

Amendment 21, page 54, line 38, at end insert

“, at least three of whom must have experience and expertise in the field of economic crime, with one each drawn from the public, private and third sectors respectively”.

This amendment would require the FCA’s Cost Benefit Analysis Panel to include individuals with expertise in economic crime.

Government amendment 14.

Amendment 3, page 54, line 41, leave out from “must” to end of line 42 and insert

“within 30 days of the receipt of representations made to it by the FCA Cost Benefit Analysis Panel, publish a response to such representations, including a statement of actions it will take as a result of the representations.”

Amendment 4, page 55, line 20, at end insert—

“(c) be provided with any information or data that the Panel requires in order to fulfil its duties;

(d) publish the agendas and minutes of meetings of the Panel; and

(e) make publicly available its recommendations in full including, but not limited to, the evidence base and analysis it used to make its recommendations, the assessed costs and benefits of the PRA‘s activities and any dissenting representations made by Panel members regarding those recommendations.”

Amendment 5, page 55, line 2, at end insert

“at least two of whom must be representatives of PRA authorised firms”.

Amendment 22, page 55, line 29, at end insert

“, at least three of whom must have experience and expertise in the field of economic crime, with one each drawn from the public, private and third sectors respectively”.

This amendment would require the PRA’s Cost Benefit Analysis Panel to include individuals with expertise in economic crime.

Government amendment 15.

Amendment 6, page 55, line 32, leave out from “must” to end of line 33 and insert

“within 30 days of the receipt of representations made to it by the PRA Cost Benefit Analysis Panel, publish a response to such representations , including a statement of actions it will take as a result of the representations.”

Government amendment 16.

Amendment 7, in clause 64, page 78, line 20, at end insert—

“(5A) The relevant requirement referred to in subsection (5) must specify that reimbursement in qualifying cases cannot be refused on the basis that a victim, or victims, ought to have known that the payment order was executed subsequent to fraud or dishonesty.”

This amendment would prevent reimbursement for victims of fraudulent or dishonest payments being refused on the basis that that they should have known the payment was fraudulent or dishonest.

Amendment 20, page 78, line 20, at end insert—

“(5A) The relevant requirement mentioned in subsection (5) must set out clearly that—

(a) those to which the requirement applies have a duty to ensure that reimbursement is made in all qualifying cases, and

(b) the penalty imposed by the Payment Systems Regulator, under section 73 of the Financial Services (Banking Reform) Act 2013, for failure to comply with that duty, will be not less than £100,000 in each instance of failure.”

Amendment 23, in schedule 2, page 119, line 19, leave out sub-paragraphs (2) and (3).

This amendment would maintain the regulator’s duty to establish appropriate position limits in commodity speculation, to ensure the effective functioning of commodity markets and prevent potentially risky speculation.

Amendment 24, page 119, line 2, leave out “that paragraph” and insert “paragraph (1)”.

This amendment would maintain the regulator’s duty to establish appropriate position limits in commodity speculation, to ensure the effective functioning of commodity markets and prevent potentially risky speculation.

Amendment 25, page 119, line 32, leave out sub-paragraph (5).

This amendment would maintain the regulator’s duty to establish appropriate position limits in commodity speculation, to ensure the effective functioning of commodity markets and prevent potentially risky speculation.

Amendment 27, page 120, line 4, leave out paragraph 48.

This amendment would remove the proposed amendment to the FCA’s power to intervene, to maintain transparency in commodity markets and reduce the scope of so-called “dark pools”.

Amendment 26, page 120, line 10, leave out sub-paragraph (4).

This amendment would maintain the regulator’s duty to establish appropriate position limits in commodity speculation, to ensure the effective functioning of commodity markets and prevent potentially risky speculation.

Government amendments 17 and 18.

Amendment 28, page 155, line 7, at end insert—

“(1A) When exercising its functions under this Part, the FCA may issue a direction to a designated person, for the purpose of establishing a banking hub.

(1B) A designated person must comply with a direction under subsection (1B).

(1C) A “banking hub” is a facility which—

(a) provides cash access services,

(b) is facilitated jointly by multiple providers of such services,

(c) contains private consultation spaces at for users of cash access services, and

(d) is established for the purpose of ensuring reasonable provision of cash access services where there would otherwise be a local deficiency of such provision.”

This amendment would require designated persons to comply with direction given by the FCA for the purposes of establishing banking hubs.

[Andrew Griffith]

The financial services sector is central to our Government’s ambition to bolster our global competitiveness and boost growth in all parts of the United Kingdom. This Bill delivers on our ambition by seizing the opportunities of our departure from the European Union, tailoring financial services regulation to UK markets and delivering better outcomes for the economy, consumers, victims of fraud and businesses. There are many amendments for consideration today, so I will be as succinct as possible, and I look forward to having time to respond to hon. Members’ contributions later.

In Committee, I heard from colleagues on both sides of the House about the importance of holding the operationally independent regulators to account regarding their performance—in particular, that there should be regular reporting on their performance to support scrutiny, beyond just the annual report. Regulation is about not just the contents of the rulebook, but how effectively and on how timely a basis those rules are enforced and implemented.

The Government and regulators are both committed to the highest standards of operational effectiveness. That is why last week we published an exchange of letters with the regulators, making clear the intention to publish more detailed performance data in relation to their authorisation processes on a more regular basis. However, I also noted the clear consensus in Committee on the need to enhance the existing statutory provisions. In particular, I thank my hon. Friends the Members for Wimbledon (Stephen Hammond) and for North Warwickshire (Craig Tracey) for raising this important issue.

As a result, new clause 17 provides a new power for the Treasury to require the regulators to publish additional information on a more regular basis, where that is necessary to support this House’s scrutiny of their performance in discharging their general functions.

[Richard Fuller (North East Bedfordshire) (Con)]

I have seen the exchange of letters—that is very welcome—and I have read new clause 17. Both lack any specificity about what those metrics may be. I do not expect the Minister to respond now, but perhaps in his summing up, to reassure those of us on the Back Benches, he could provide some comfort about how specific he and the Treasury will get.

[Andrew Griffith]

I thank my hon. Friend who, as one of my predecessors, has made a significant contribution to getting the Bill to where it is today. I will try to indulge him, but he will also recognise that the Bill is about putting enabling powers in place, and there will be opportunities on future occasions to discuss how we deploy those.

New clause 18 introduces a requirement for the regulators to ensure that all members of their statutory panels are external and independent of the Treasury, the Bank of England and the regulators. That will codify the current approach taken by regulators, putting it in statute, building confidence in their independence and ensuring that it is maintained on a long-term basis.

New clause 19 introduces a new requirement for the regulators to publish a list of respondents to their public consultations, provided that the respondents consent. The requirement is limited to the financial services regulators and their specific statutory consultation in existing financial services legislation. New clauses 18 and 19 also address points raised by my hon. Friend the Member for North East Bedfordshire (Richard Fuller) and the hon. Member for Richmond Park (Sarah Olney).

I also note the interest of my hon. Friend the Member for Harrow East (Bob Blackman) in enhancing regulator accountability through his new clauses on a new regulators’ supervision council and ending regulators’ statutory immunity from civil damages. I understand where he is coming from, and I note that he chairs the all-party parliamentary group on personal banking and fairer financial services, but the Government’s position is that a new supervisory council would duplicate existing accountability structures. Indeed, none of the representations that I receive from industry says that the biggest thing that will help growth and competitiveness is another layer of regulators. There is also a great deal of existing accountability structures, including the role undertaken by this House and its various Committees, which is why that position was supported by the Treasury Committee in its July 2021 report. Removing the regulators’ statutory immunity from liability and damages would risk regulators over-regulating to avoid the risk of liability. There are already mechanisms for holding regulators to account, including the complaints scheme. That scheme is overseen by the independent complaints commissioner, who has powers to recommend redress.

[Peter Grant (Glenrothes) (SNP)]

I certainly appreciate the Minister’s concern that we might see precautionary regulation, but is the best way to avoid that not simply to restrict the removal of liability to cases in which the regulator has clearly and negligently failed to act to deal with a situation in which an already regulated activity was being carried out in an unacceptable way? That is what happened with Blackmore Bond. It was not an unregulated activity; it was an activity that fell within the scope of the Financial Conduct Authority, but it failed to act and £46 million was stolen from people as a result.

[Andrew Griffith]

The hon. Member draws our attention to the very tragic cases that occur when financial regulation goes wrong and does not do its job in the way every Member of this House would like to see. He also talks about a legal threshold for that. He will perhaps appreciate that I do not have the facts of that particular case before me and that we are not drafting things here and now. I have heard from Members on both sides of the House about some of the problems in what we are talking about, which is essentially the conduct of the regulator, and I understand colleagues’ desire to look at legal liability as one remedy, but there are many powers in the Bill, and as I say, the Bill will not constrain the ability of this House or Ministers going forward.

The hon. Member for Kingston upon Hull West and Hessle (Emma Hardy), with whom I spent a lot of time in the Bill Committee—I suspect we will hear from her later this afternoon—has tabled a new clause on considering economic risks in regulators’ cost-benefit analysis panels. I would like to reassure her that the regulators already take steps—and, to assuage her concerns, they could perhaps do more—to think about economic crime when they do that. They have the power, of course, to consult experts where they consider it relevant.

I thank my hon. Friend the Member for North East Bedfordshire again for raising the issue of regulatory proportionality. I wish to reassure him that the Government are clear that the burden of any regulation should be proportionate to its benefits, and that is set out in existing legislation. I am very happy to reiterate again today that I expect the regulators to fully and proactively embrace that principle, which is embedded in statute. That is particularly important, as the Bill confers on them greater rule-making responsibilities. I suspect we will hear from my hon. Friend later on.

I will now turn to Government amendments 8 to 11 —I apologise, but there are quite a lot of amendments to crack on through. Clause 6 already enables the Treasury to exempt regulators from the statutory requirement to consult on rules when they are replacing retained EU law repealed by the Bill without making material changes. Amendments 8 to 11 go further. They create a blanket exemption from the statutory requirement to consult in situations in which the regulators remove EU-derived rules from their rulebooks without replacement. The amendments also allow the Treasury to exempt the regulators when they are amending EU-derived rules or replacing retained EU law in their rulebooks, and when the only material effect of the change is to reduce regulatory burdens. That ensures that the regulators can take that proportionate approach to consultation, accelerate the repeal of retained EU law, and not let the requirement to consult be an obstacle or delaying factor. It is a long time since the British people voted for Brexit, and it is time to start delivering those benefits. Nothing in the amendments changes the obligation on the regulators to act to advance their statutory objectives, so any reduction in regulatory burdens must be compatible with those objectives.

Let me briefly cover the two remaining Government amendments, and I will then move on. New clause 20 ensures that a new type of fund vehicle currently being explored—the unauthorised contractual scheme—would be commercially viable if it were introduced. The proposed fund has the potential to improve the competitiveness of the UK by filling a gap in the UK’s existing fund offering and supporting the domestic growth agenda by facilitating greater investment in UK real estate by UK funds. Amendment 17 is a minor and technical amendment to rectify an inadvertent omission in drafting.

I will now address the amendments tabled by other Members. I am conscious that I am speaking before Members have had a chance to introduce their amendments, so I look forward to responding in more detail, where necessary, at the end of the debate. Let me start with the important issue of access to cash. I represent a rural constituency with a higher-than-average proportion of elderly and vulnerable residents, so I am acutely aware of the very real concerns around this topic. As of today, there remains extensive access to cash across the UK as a whole—over 95% of people live within 2,000 metres of a free cashpoint. I want to be clear that it is not acceptable for people to have no option but to travel large distances or pay ATM fees to access their own money.

If hon. Members have a concern in their local area, as I know many have, I strongly recommend that they reach out to LINK, which is leading the industry-led initiative to see what can be done to help constituents. LINK is delivering, for example, a new free-to-use ATM in the Pollards Hill estate in the constituency of the hon. Member for Mitcham and Morden (Siobhain McDonagh)—I have already made a commitment to her to visit and open it.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

May I say to the Minister that I am delighted that LINK is providing that machine? That part of outer London is, as many Members here will know, inaccessible apart from by limited public transport. There are two paid-for machines in the terrace, but a free one has been refused for years and years and years. I believe that this machine may be coming because of this very amendment—new clause 7. Unless it is there in writing, how can anybody in this House feel confident that free cash machines will be kept? Their numbers are reducing at pace.

[Andrew Griffith]

The hon. Lady probably proves each of our points, including my point that we start from a position where there is an industry-led solution, and I am sure that many colleagues will be auditioning for these new industry-led free cash machines.

[Dame Andrea Leadsom (South Northamptonshire) (Con)]

Will my hon. Friend give way?

[Andrew Griffith]

I was just about to mention my right hon. Friend.

[Dame Andrea Leadsom]

The Minister and I had a very good conversation about this very subject. He is aware that back in the days of a former Treasury Committee and an earlier Government, there was a huge move away from ATMs per se, let alone free access to people’s own cash. Can he therefore make it clear at the Dispatch Box what he said to me, which is that the Government are entirely behind free access to cash and will make that clear in the guidance?

[Andrew Griffith]

My right hon. Friend is just one of many colleagues—many in the Chamber today, but also my hon. Friends the Members for Newton Abbot (Anne Marie Morris) and for Don Valley (Nick Fletcher)—who have made precisely this point. It is the Government’s expectation that the industry-led initiative must deliver. As I will come on to clarify, the powers we are taking in the Bill—we are not mandating them, because we do not support the amendment from the hon. Member for Mitcham and Morden (Siobhain McDonagh)—give us the flexibility in future, by means of a direction statement to the industry, to mandate free cash machines.

[Siobhain McDonagh]

rose—

[Andrew Griffith]

Let me finish this point, because I know many Members are vexed by this issue and we understand how important it is. Work has been done since my right hon. Friend the Member for South Northamptonshire occupied my position. A further 47 communities represented in this House will benefit from similar cash facilities funded by the banks, as part of that LINK assessment process. I urge all colleagues to take advantage of that, and my office is happy to help to do that.

[Several hon. Members rose—]

[Andrew Griffith]

I am going to finish this point, and then we will hear from more Members. We must not underestimate the significance of what the Bill is doing: it is taking legislative action for the first time in the more than 1,000-year history of the Royal Mint, where the UK pioneered paper banknotes in the 17th century and since we introduced the world’s first ATM in 1967. This Government—right now, today—are putting on the statute book and protecting access to cash, to safeguard the needs of those who need it.

[David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)]

Like my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom), I had a very useful conversation with the Minister. Will he confirm what I think he just said, which is that if it becomes clear that people do not have free access to cash across the United Kingdom, the Government will proactively intervene to make sure that they do?

[Andrew Griffith]

We talked about my right hon. Friend’s relative munificence of 53 free cash machines in his constituency—I think it was that at the last count. What he says is the case. The Bill gives the Government the ability at any point in time to give direction to the Financial Conduct Authority, the relevant regulator—this is the basis on which we regulate all our financial services in this country—through a policy statement that will set out the Government’s policy on such matters as cost and location. I am being clear that it is our expectation that the industry will deliver on this important issue for our constituents. If not, the Bill gives any future Government the ability to mandate that.

[Kit Malthouse (North West Hampshire) (Con)]

Notwithstanding the support that the Minister is giving to the notion of free cash, he will recognise that the Government cannot sit there like King Canute, and that between 2010 and 2020 the number of payments made in cash went from 50% to 17%. That has fallen yet further during the pandemic. There are significant advantages to cashless transactions, not least in the elimination of crime. Actually, it is a bit of a myth that there are sections of society that struggle, and we see that most apparently in the advent of cashless parking. There are hardly any councils left in the country now that use cash for their parking. They are all using apps on smartphones. When we introduced it when I was at Westminster City Council, we did not have a single complaint from an elderly person—quite the reverse. They often found it much easier than fumbling around for coins and notes to be able to park, as well as having the ability to extend the time using the phone. There are great advantages to the elimination of cash in society too.

[Andrew Griffith]

My right hon. Friend is right and illustrates well the Government’s desire to achieve the right balance in this debate, rather than operate at either extremity. He will know from his former role the significant move in relation to Oyster and the ability to be cashless.

[Siobhain McDonagh]

Is the Minister aware that we have lost 12,599 free-to-use ATMs since 2018? That is a reduction of 24%. Who in this House, understanding that trajectory, would believe that the numbers are not going to fall further?

[Andrew Griffith]

I will repeat my previous point, and the hon. Lady will have her chance to speak later. It is the objective of the Government, in the course of the transition that my right hon. Friend the Member for North West Hampshire (Kit Malthouse) talked about, to protect the vulnerable and ensure that protection of access to cash. The hon. Lady’s statistic is right, but I reiterate that more than 95% of people today live within 2,000 metres of a free cashpoint, and I hope she recognises that.

[Anthony Browne (South Cambridgeshire) (Con)]

I want to follow up on some of the comments from my right hon. Friend the Member for North West Hampshire (Kit Malthouse). Cash is being used far less than it was previously. That is good and convenient for many people. I fully support the Government’s moves and the ambition across this House to ensure that we have access to free cash, but there is no point in people having access to free cash if they cannot spend it on essential items. I just flag that many retail outlets no longer accept cash. It is not just parking; there are cashless bars and so on. That is fine, but there is a scenario where outlets that sell essential items such as food shops and chemists might at some point be required to accept cash, because if they do not accept cash, lots of people will be excluded.

[Andrew Griffith]

My hon. Friend makes another important point, and I fear we are in danger of previewing the debate that we shall have this afternoon. When we talk about access to cash, we are not just talking about withdrawals; we are also talking about the deposits that are so vital. If our small businesses in particular are to continue to take cash, they need to be able to deposit that securely, safely and conveniently.

[Dr Rupa Huq (Ealing Central and Acton) (Ind)]

I just want to broaden the debate from ATMs to bank hubs. These were promised as a panacea for towns where the last bank has gone, such as Acton. It is not just about rural communities. Acton was one of 10 places that were promised a bank hub last December, but nothing has happened. There is a lack of will, and they are under-resourced and voluntary. Perhaps there is an argument for more regulation to make them happen, because The Daily Telegraph and the Daily Mail were saying in the autumn that none of these—zero—has happened, but I understand that since then two of them have. In the meantime, Acton is a cash desert. In 2018 we lost our post office, never to be replaced. What advice does the Minister have for me? How can he compel that bank hub to open?

[Andrew Griffith]

The bank hub initiative, just like the new voluntary initiative on LINK cash machines, has an important role to play. Frankly, these initiatives have started relatively recently, and as well as making sure today that we get the right balance in statute, we also need to see them delivered. I will take that case forward for the hon. Lady, and I will write to her. The bank hubs programme is now being deployed at pace. My hon. Friend the Member for Totnes (Anthony Mangnall) boasts of his bank hub, which I suspect will not make the hon. Lady delighted, but it shows that they can deliver, and that is what we want.

I will clarify for the record what we are saying, if I may. Under the Bill, the FCA, when acting to ensure reasonable access to cash, has to have regard to the Treasury’s policy statement in this area. That is the statement that will set out from time to time the Government’s position on matters such as cost and location, and the FCA will have to have regard to that when setting the detailed prescriptive regulations.

That gives time—I am putting the industry on notice—for those industry-led schemes to prove that they can deliver, and to ensure that the Government have a robust regulatory framework: a belt-and-braces framework. I believe that is the right and flexible way of dealing with the matter, rather than right now locking it in statute for all time. I will ensure that we reflect the House’s views on that when we craft the policy statement.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

The Minister is being very generous in giving way. The point made by the right hon. Member for North West Hampshire (Kit Malthouse) makes clear the need for free access to cash to be provided for in the Bill. As the number of people making cash transactions falls, it becomes more expensive to distribute cash freely. There is, however, as I hope we all understand, a vulnerable group in our society who still need free access to cash. As cashless transactions increase, the need to maintain free access to cash for the most vulnerable people in our society increases. That is why we are asking for it to be provided for in the Bill.

[Andrew Griffith]

I agree with the hon. Lady’s point that it becomes a pressing issue. The justification, having successfully transacted in cash since the first Roman emperor decided to dispense pieces of metallurgic value with his head on them, is precisely that we see the transition and we want to get it right, in the interests of the vulnerable. The Bill also contains powers to regulate the wholesale distribution of cash—those people who trunk cash up and down cash centres across the United Kingdom.

[Kit Malthouse]

Will the Minister give way?

[Andrew Griffith]

We have spent a long time on cash, so I will take one final intervention on this. Then I will make progress, simply to allow other Members the chance to make the points that they are here to make.

[Kit Malthouse]

I am grateful to the Minister. He may not be old enough, but some of us will remember the moment the cheque started to go out of usage. There were lots of claims of damage to certain sections of society, and that lots of people would be outraged when the cheque disappeared. Now people operate without chequebooks on a daily basis, and no retailers, as far as I am aware, accept cheques. On the idea that we should mandate that cash be accepted, we cannot stand in the way of the fact that consumers are voting not to use cash. The market is telling us that cash is running out of use, and let us scotch the myth that there is such a thing as a free ATM. The network at the moment costs about £5 billion to operate. That is paid for by every user of the bank, whether they use the ATM or not.

[Andrew Griffith]

My right hon. Friend makes his points very well. As he said earlier, there are significant benefits in relation to fraud, traceability and the environment from dematerialising, but it is not the position of the Government to advocate for it.

[Siobhain McDonagh]

rose—

--- Later in debate ---

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I reiterate what the Minister said: a lot of Members wish to speak in the debate, and he has been on his feet for about half an hour. If we are to have time for the amendments and other contributions, we need to cut back on interventions.

[Andrew Griffith]

Thank you, Mr Deputy Speaker; you are as wise as my right hon. Friend the Member for North West Hampshire is flattering. We will make some progress and allow others to contribute.

Let me move on to access to banking and payment services. Just as we have said about cash, they are the essential ingredients of modern life and for many businesses. The new clause tabled by my hon. Friends the Members for Hastings and Rye (Sally-Ann Hart) and for Northampton South (Andrew Lewer) raised the important issue, to all of us in this House, of free speech, and the crucial role of payment service providers in delivering services without censorship. Since Committee stage, I have met with my hon. Friend the Member for Hastings and Rye, the FCA and PayPal regarding its recent temporary suspension of some accounts. I draw hon. Members’ attention to my letter deposited in the House, in which I set out the Government’s position on that important matter. I also circulated the letter from PayPal that sets out that it re-evaluated and reversed its decision in a number of the specific cases raised. It says that it was never its intention to be an arbiter of free speech, and that none of its actions was based on its customers’ political views.

I want to be extremely clear that the Government are committed to ensuring that the regulations respect the balance of rights between users and service providers’ obligations, including in respect of freedom of expression, whether of the Free Speech Union, the trade union movement, law-abiding environmental movements or anyone else expressing lawful views. To ensure that the existing regulatory regime is operating as it should in that respect, I will seek further evidence through the Government’s review of payment services regulation in January. To continue this transparent dialogue with colleagues on an important subject, I will provide an update to Parliament in the form of a written ministerial statement before the formal closure of that review, and table amendments to the relevant regulations using the powers in today’s Bill, if necessary.

We recognise the value that the mutuals sector brings to the UK economy in providing a door to affordable credit. The Government are committed to the health and prosperity of the mutuals sector, which is why we supported the private Member’s Bill of the hon. Member for Preston (Sir Mark Hendrick), which would allow co-operatives, mutual insurers and friendly societies further flexibility in determining for themselves the best strategies for their business. As I said in Committee in response to amendments tabled to today’s Bill by the hon. Member for Hampstead and Kilburn (Tulip Siddiq), the Government consider that the Financial Services and Markets Act 2000 already ensures that regulators consider mutual entities as they exercise their regulatory functions.

--- Later in debate ---

[Mr John Baron (Basildon and Billericay) (Con)]

On the FCA and financial inclusion, it is very wise that we ensure that good financial advice is imparted by the powers-to-be. In referring Members to my entry in the Register of Members’ Financial Interests, may I say that when it comes to things such as investment trusts, we are still trying to throw off the yoke of well-intentioned but misguided EU regulation when it comes to information that could lead to a misunderstanding about risk? The FCA seems somewhat reluctant to carry that forward. Will the Government ensure that the regulators, including the FCA, are doing their job?

[Andrew Griffith]

My hon. Friend makes a very fair point. To be clear, the purpose of good financial regulation cannot be to extinguish risk, but is to give people choice and indeed allow them to reap the rewards of taking risk in an appropriate and informed fashion, so I completely agree with him.

On the theme of reporting, I assure the hon. Member for Blaenau Gwent (Nick Smith) and my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) that the consumer panel, like all other statutory panels, already produces an annual report with the panel’s opinion on matters that it has engaged with the FCA on; however, following new clause 10 being tabled, I recognise the need to ensure that reports are brought to the attention of the House. I have engaged with the FCA, which has agreed with me that in future it will notify the Treasury Committee, as the relevant Committee of this House, on publication of the consumer panel’s report, to ensure that Members of this House are aware of and can fully engage with it. I hope that that goes some way to giving the hon. Members the satisfaction that they seek.

Before I speak about the financial advice guidance boundary, raised in new clause 11 in the name of my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee, let me congratulate her on her relatively recent election to that role—although I hope that we have worked well together even during her short time in it.

[Nick Smith (Blaenau Gwent) (Lab)]

I congratulate the Minister on his earlier remarks about seeking to improve the performance of the FCA. Many people on both sides of the House want that to happen. It is pleasing that the Treasury Committee will hear information on reporting from the consumer panel of the FCA; however, a number of financial scandals have affected the constituents of Members across the House in recent years. While I hear what the Minister says, I am really looking for a greater opportunity to challenge the FCA through its consumer panel than he has so far suggested, but I hope that we can work together to strengthen that point.

--- Later in debate ---

[Andrew Griffith]

I thank the hon. Member for his point. I had that conversation with the FCA precisely to try to achieve that purpose. If there are other ways to do that that will help him, I am happy to do so.

I was talking about the financial advice boundary, which is a real concern and speaks as much to financial inclusion as to the work of the advisory sector. My hon. Friend the Member for West Worcestershire, when she was in this role, undertook some important work on the comprehensive financial advice market review, which led to some important improvements in the market at that time. Unlike me, however, she was not blessed with the Brexit freedoms of being able to influence our own rulebook.

I completely agree with my hon. Friend that it cannot be right that only the wealthiest can access financial advice. The situation today is a good example of the unintended consequence of well-meaning regulation that we should be alive to. I thank the Investing and Saving Alliance and others for their efforts to promote reform in this area, and it is something that I will take forward and see what I can do to progress. We will revisit the issue and work closely with the FCA and the industry. I assure her that there is nothing in the Bill that would impede any of the things that she seeks to do.

[Harriett Baldwin (West Worcestershire) (Con)]

The Minister is making some encouraging sounds about new clause 11. In addition to the commitments that he has just made, will he instruct officials to look at the matter with the greatest urgency?

[Andrew Griffith]

I am happy to confirm that we will pursue it with great urgency, as the Government should be doing with everything in this important domain. Although the Government will not be supporting new clause 11 today, it goes some way to address the issue, so I will look at it as a basis for potentially moving forward. The Bill enables us to do that, so we do not have to do it today. I commend the other amendments tabled in relation to preventing consumer harm.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

The Minister has been talking about the importance of regulation. He will know that one area that is not regulated at all is buy now, pay later, and he will have seen new clause 28 in my name. A poll published today says that 40% of the British public will do their Christmas spending with a buy now, pay later loan. A quarter of those who use buy now, pay later are missing other payments, because they are getting into a cycle of unaffordable debt. We have been talking about regulating these companies for nearly three years now; the Government’s proposals talk about regulation possibly coming in another year’s time. Can he see a way to at least introduce the protection of the ombudsman, so that this Christmas does not leave families with a nasty wake-up call come 1 January?

[Andrew Griffith]

I will try to respond to the hon. Lady’s points further when I sum up, so I can make some progress. We had that debate several times in Committee. We have to be slightly cautious about the unintended consequences of taking into scope a much wider set of transactions that involve an element of deferred payment, but I am sympathetic to her points.

I thank my hon. Friend the Member for Harrow East for raising the topic of a statutory duty of care for consumers. Ensuring that consumers of financial services get the right protection they need remains a priority. The FCA comprehensively analysed the options for improving that, which led to the consumer duty that will come into force in July.

The hon. Member for Bath (Wera Hobhouse) tabled new clauses 34 and 35 to require trustees of occupational pension schemes and fund managers to act in the best interest of beneficiaries, which is indeed the position as it stands today, although I will listen carefully to her points. Trustees and fund managers will be subject to the FCA’s consumer duty, which puts on them a focus of delivering good outcomes for customers.

I turn to amendments relating to frauds and scams. The Bill is a huge step forward in tackling the growing problem of authorised push payment scams. I will be clear that, as I set out in my response to the hon. Member for Hampstead and Kilburn in Committee, the Government are committed to tackling fraud far more widely than in just financial services. She may like to know that the Home Office has now confirmed that a national fraud strategy will be published early in the new year.

Specifically for financial services, UK Finance publishes a half-year fraud update, which sets out how the industry is working together to respond to the fraud threat and to support customers. In relation to the amendments concerning the reimbursement of victims of authorised push payment scams, the payment systems regulator has already signalled its intention to deliver a higher degree of consumer protection.

On sustainable finance, no Government have done more on the climate. We have legislated to reach net zero greenhouse gas emissions by 2050. We support strengthening the UK financial services regulatory regime’s baking in of the climate, as underlined by clause 25, which requires the regulators in discharging their functions to have regard to the need to contribute to achieving compliance with net zero. The regulators will be required to report annually on how they have considered that regulatory principle. That is a significant step in our goal of making the UK a net zero-aligned financial centre, and builds on our green finance and net zero strategies across the whole gamut of regulatory activity. The Government committed to updating our green financial strategy and will announce further information on timing imminently.

[Dame Andrea Leadsom]

I am delighted to hear that from my hon. Friend. Does he agree that that not just gives the UK a competitive edge but creates many new jobs and opportunities for the UK to lead the world in green finance, as well as other green industries in future?

[Andrew Griffith]

Absolutely; it is a strategy that pays back on many levels. It is biased towards left-behind communities and parts of the United Kingdom, it creates jobs and prosperity, it safeguards the prospects of the City of London and our financial and professional services and, of course, it ensures that we deploy capital in pursuit of the transition to a clean, low-carbon world.

[Olivia Blake (Sheffield, Hallam) (Lab)]

How does the Minister square the language that he has just used about how great the UK is with two major banks that are based here providing £107.44 billion to the top 50 companies expanding upstream oil and gas? Is that not exactly why we need some of the sustainable finance amendments that have been tabled?

[Andrew Griffith]

I beg to differ with the hon. Lady, because it is important to finance the transition to achieve a just green financial future. While we are making all these efforts and coming forward with things such as the taskforce on nature-related financial disclosures, we will therefore make sure that we are not defaulting to divestments and boycotts, because that is not our view of the way that the Government will finance the clean energy revolution.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Bank of England’s climate stress test, published in May, showed that banks need to take climate action immediately or face a hit to annual profits of up to 15%. This is not just about airy-fairy words about the transition, but about banks that, as we have just heard, are bankrolling the fossil fuel industry, which will bring real risks to the finance sector as well as to the rest of the world. Can the Minister say whether he will support new clause 25?

[Mr Deputy Speaker (Mr Nigel Evans)]

Before the Minister does, I will just say that he has been speaking for three quarters of an hour now. A lot of people want to contribute to the debate.

[Andrew Griffith]

On this side of the House, we are about action not words. I listened with great care to what the hon. Lady said, but action starts at home. In her constituency, the Green party leader flew on a jet aeroplane to COP and the level of recycling is half that of neighbouring West Sussex. People should get their own house in order before coming to virtue-signal about others’.

New clauses 8 and 9 in the name of the hon. Member for Sheffield, Hallam (Olivia Blake) raise the important issue of financial stewardship. The Department for Work and Pensions, which is responsible for that, has already made a public commitment to review stewardship disclosure requirements. That will be done during 2023.

Finally, the Government believe that effective commodities market regulation is key to ensuring that market speculation does not lead to economic harm. The current regime we have inherited from the EU is overly complicated and poorly designed. To ensure that this is calibrated correctly, the Bill delegates the setting of position limits from the FCA to trading venues themselves. The amendments in the name of the right hon. Member for Hayes and Harlington (John McDonnell) seek to reverse this. The Government’s position is that this would place unnecessary restrictions on investors, to the detriment of all market participants. It would place the UK at a disadvantage compared with other international financial centres, such as the EU, that apply restrictions only to contracts that genuinely pose a risk.

--- Later in debate ---

[Sarah Olney (Richmond Park) (LD)]

The Liberal Democrats recognise the importance of good regulation. Well-designed, effectively administered, properly enforced regulation creates a level playing between competitors and instils confidence in consumers and players in all markets. As the Liberal Democrats’ Treasury and business spokesperson, I have spoken to many businesses in many sectors, including in the City, and I have not found anywhere an appetite for the sweeping away of regulations often advocated by Members on the Conservative Benches. Everywhere I hear calls for effective regulation, properly administered.

[Andrew Griffith]

Would the hon. Lady be able to identify any Member of this House who has talked about the merits of sweeping away regulation? That is not the position of the Government.

[Sarah Olney]

With respect, I did not say it was the position of the Government, but the Minister cannot deny that it has been advocated for on many occasions during the referendum campaign and on many occasions since. I think he is being disingenuous.

Although the Liberal Democrats welcome some aspects of the Bill that will update the regulatory framework for financial services, we remain concerned by the lack of accountability of the regulators to Parliament and by the potential impact of this Bill on financial stability. The Government have described this Bill as a once-in-a-generation opportunity to reshape financial regulation, but as currently written the Bill lacks ambition and inspiration. In particular, it is a missed opportunity to create a regulatory framework that turbocharges the green agenda and strengthens protections for victims of fraud.

My fundamental concern with the drafting of the Bill is how it undermines the role of Parliament while extending significant new powers to both regulators and the Treasury. As ever, the devil is in the detail, which will be largely hidden within secondary legislation that will not receive parliamentary scrutiny or oversight. Accountability and transparency are the cornerstone of effective regulation. It is vital that those principles are upheld to maintain national and international confidence in the UK’s financial services sector and to improve the operational performance of regulators.

The Bill did not previously contain sufficient powers to require the regulators to report on their performance against their objectives. I am therefore pleased that the Government have made some steps towards improving accountability and transparency though the addition of new clause 17. However, the new clause still does not go far enough in establishing parliamentary oversight of the regulators. Regulators’ powers are granted by Parliament, and that is who they should be accountable to—not to a Minister who may only be in place for a matter of weeks.

I remain concerned that the new statutory objective on international competitiveness could increase risk-taking in the financial services sector. We do not need to be reminded of just how damaging that sort of behaviour can be. I am particularly concerned that the secondary objective of competitiveness will negatively impact the regulator’s delivery of its primary objective of ensuring financial stability.

Our amendments (a) and (b) to new clause 17 would place additional requirements on the regulators to report on the delivery of their objectives, including with an assessment of the impact of the Bill on financial stability. If the last few months have proved anything, it is that volatility in financial markets has a very real and direct impact on households, so I urge the Government to think about how the Bill can be strengthened to ensure that financial stability remains at the forefront of regulators’ activities.

I am pleased to see that a number of amendments on green finance have been tabled, but it is disappointing to see the Conservatives’ lack of ambition in that area. We have such an opportunity to be a leading global centre for green finance, but the Bill does nothing to facilitate that. There is an increasing appetite among investors to support the green transition, but British businesses often struggle to access the green capital they need. New clause 33, tabled in my name, would place a requirement on the regulators to report on ways in which they have promoted and incentivised green finance and green investment. Time is running out for us to lead the world on this, and I urge the Government to commit to a green finance strategy and to start thinking seriously about how a regulatory framework can mobilise green finance.

--- Later in debate ---

[Mr Baron]

I very much welcome the Bill and congratulate my hon. Friend the Minister on listening to and engaging with the points raised by many of us on the Back Benches.

I support new clause 11 in particular—I was heartened to hear what the Minister had to say about it—but may I perhaps reinforce a very simple message about the urgency required on financial advice? We in this country have been blessed with the City of London and many other world-leading financial institutions around the UK. I think I can say with some confidence that London is the financial capital of Europe, if not the world. The world comes here to do business on a variety of fronts. Yet we have very little good access to advice. In fact, if anything, we have a widening advice gap.

On the one hand, we have wealth managers raising their minimums, banks withdrawing from the high street and withdrawing fully from providing investment advice; we also have the retail distribution review, which I supported because it was ending the backhand commission for unit trusts—that was bad for the consumer—but it has resulted in independent financial advisers having to charge more and few of them being used. On the other hand, with all that advice in retreat, we have the Government and all parties saying that we must take greater control of our finances, there are greater pension freedoms and there is a great demand for good advice.

A lot of people of modest means who have no access to good advice fall into that void. They may be tempted, for example, to leave cash in the bank earning a pitiful rate of interest while inflation erodes its value. This is where the law of unintended consequences comes in, because all that regulation that had to be met before one could offer full-blown advice is fine when we are talking about full-blown advice, but there is a middle ground that needs to be covered. I offer a basic statistic that might interest or help those willing to take a particularly long-term view to their financial planning: instead of leaving money in cash, if they invest in equities over the long term—25 years, for example—they stand a very small chance of losing money. There will be volatility, but because they are investing, hopefully, in growing businesses, they will do well, and 97 times out of 100, that will beat cash deposits. That is the sort of advice that banks, building societies and many others could give, without getting too complex about financial planning. It would offer consumers a choice, rather than just letting their cash sit in banks and get eroded. Will the Minister therefore give impetus to the assurance he has given on new clause 11 and really get the Treasury looking at this issue, because there is a halfway house, and we must not stop regulation being the enemy of the good? That is what we are asking for.

I will add one other thing quickly in the minute I have left. Please make sure that our regulators listen to the various trade bodies when it comes to regulation, because we are inheriting—I very much welcome this Bill—a lot of powers from the EU. We are in control of our own destiny, but I take issue with the FCA on a number of points. One of them is that when it comes to investment trusts, there are such things as key information documents. They are an invention of the EU and are misleading about risk and putting consumers at risk of losing money—it is as simple as that. The Association of Investment Companies has said that. By the way, it has also said, in relation to those key information documents, “burn before reading”. Despite that, there has been no meaningful action from the FCA on that issue, and that is wrong. I ask the Minister to make sure that our regulators do not rest on their laurels, realise the greater freedoms they have got and rise to the occasion.

[Andrew Griffith]

I thank Members from all parts of the House who have spoken today for their valued and often very informative and sometimes passionate contributions. I sense a tone of disappointment in the hon. Member for Hampstead and Kilburn (Tulip Siddiq), my shadow on the Opposition Front Bench. I will try to endeavour not to disappoint her in return for her party’s support for this important and landmark Bill. I spoke at length in my opening remarks. I hope I was generous in taking interventions, and perhaps colleagues will indulge me if I try to get through this as quickly as possible.

We heard from my right hon. Friend the Member for Chelmsford (Vicky Ford), my predecessor, who contributed so much to this Bill. We also heard from my hon. Friend the Member for North East Bedfordshire (Richard Fuller) and from my hon. Friend the Member for North Warwickshire (Craig Tracey), who served on the Bill Committee. They all spoke to a greater or lesser degree in support of new clause 17 and about how we can make that better and better hold the regulators to account.

We heard about the specific metrics suggested in new clauses 12, 13, 14 and 15—my hon. and right hon. Friends are very productive. I can say that I will consider things very carefully. In those amendments, they gave specific examples of how we could potentially deploy the powers in new clause 17, and I undertake to consider carefully whether those are the right way forward. We heard from my right hon. Friend the Member for Chelmsford about that sense of urgency, and we got that again in new clause 11. Again, it is potentially a good way forward that I would like to consider.

We all understand that it comes down to financial inclusion, for which the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) rightly never fails to agitate. If, however, the consequences of our financial regulation exclude, as I think we heard, 92% of people from getting basic guidance on the sorts of products that are right for them, that is a problem for inclusion and for the industry. It is something that I was asked to take away with due urgency, and I commit that once we have the Bill on the statute book that is absolutely what I will do. Technology can be our friend there as well. We heard that from my hon. Friend the Member for West Worcestershire (Harriett Baldwin), the Chair of the Treasury Committee.

--- Later in debate ---

[Andrew Griffith]

My hon. Friend is absolutely right that that is a critical priority. We heard the figures—no one disputes them—about the growing prevalence of fraud, much of which is displacement as people go online. We need to give people the tools to protect themselves and we need to ensure that it is a high priority for those who seek to protect us.

We will empower the public with information. The hon. Member for Kingston upon Hull West and Hessle talked about financial inclusion. As we know, there is a slight difference of opinion, in that the FCA considers that that is already within its remit. It is absolutely something that I would like to see greater transparency on, and perhaps that is somewhere we can make common cause.

[Sir Geoffrey Clifton-Brown]

On fraud, about which I gave the figures to the House earlier, we had a hearing of the Public Accounts Committee the other day. I suggested two things: first, fraud should be made a strategic priority for every police force; and secondly, every police officer in the country should receive at least some basic training in the likelihood of fraud crimes.

[Andrew Griffith]

Fraud is of course a shared responsibility between the Treasury and my hon. Friends in the Home Office, and when it comes to the report that the hon. Member for Hampstead and Kilburn is quite rightly challenging us to produce as quickly as possible, we want that report to be right rather than quick, but we do need to bring it forward as quickly as possible. We will use the time wisely to engage with expert stakeholders, which could well include the training of which my hon. Friend speaks, and we will come forward with that early in 2023.

In addition, this Bill is a seminal moment in protecting victims of authorised push payment fraud. It will ensure swift protections for the vast majority of APP scam victims, reversing the presumption and making sure they receive swift reimbursement so that they are no longer victims of this crime. The measure enables the Payment Systems Regulator to take action across all payments systems, not just faster payments, which is where the fraud occurs most, so that it does not merely get displaced. The Government expect protections for consumers across all payments systems to keep pace with that.

[Richard Fuller]

My hon. Friend has not yet had an opportunity to talk about the Government’s initiative on stablecoins and digital currencies. Given that he has just talked about scams and some of the concerns with cryptocurrencies, is he reassured that what is in this Bill relating to stablecoins remains absolutely front and centre of the Government’s attention?

[Andrew Griffith]

I again thank my hon. Friend, who did so much work on this Bill. It is absolutely right that the Government keep an open mind to new technologies, and my hon. Friend the Member for Devizes (Danny Kruger), who is always very thoughtful, talked about this, but we have to understand the risks. While the risks to consumers of scams in the crypto-space, among others, is extremely high and has been well telegraphed, when it comes to looking at different payment systems—with the power of distributed ledger technology to solve issues such as settlement to make our financial markets cleaner, faster and more efficient—it is absolutely right that the Government consider looking at that, and we will be looking to do more in that domain.

[Tulip Siddiq]

I thank the Minister for his response, and he is making encouraging noises about the forward strategy, which I look forward to seeing, but I have not yet heard him mention anything about data sharing. The fact is that frauds and scams have moved on from what they might have been in the past. Is he going to give some indication of whether there will be a data-sharing arrangement that goes beyond just banks and takes into account social media companies, crypto-asset firms and other platforms that criminals are exploiting, because our vulnerable constituents are falling prey to frauds and scams? It is no good just going back to the old ways on frauds and scams—I am sure he understands that—so could I hear a bit more about data sharing, please?

[Andrew Griffith]

He does indeed understand that. We are addressing legal challenges to data sharing in the Economic Crime and Corporate Transparency Bill, which will introduce provisions to protect firms from civil liability. As was discussed earlier, it is important to regulate the online world, which my colleagues in the Department for Digital, Culture, Media and Sport are doing in the Online Safety Bill.

[Danny Kruger]

Will the Minister give way?

[Andrew Griffith]

I will not give way to my hon. Friend this time.

To conclude, financial and related professional services play a crucial role, as we have heard from many speakers. They contribute nearly £100 billion in taxes and, as my right hon. Friend the Member for Chelmsford reminded us, that pays for more than the cost of the salaries of every nurse in this country. The Government have an ambitious programme for an open, outward, sustainable, technologically advanced and internationally competitive sector that will unleash the most opportunities not just for those who work in it, but for communities across the United Kingdom.

[Stella Creasy]

I am sorry to interrupt the Minister in his final flow, but he did promise he would give me a direct answer. With 40% of people saying they are going to put their Christmas spending on buy now, pay later loans, and they have no regulatory protection, what is going to do to help them this Christmas?

[Andrew Griffith]

The hon. Lady knows from our conversations in the Bill Committee our ambition to look again afresh at the regulations in the consumer credit market. That is outwith this Bill, but it is a commitment that remains and that we will bring forward at the earliest opportunity.

Do not underestimate the power of this Bill. This is an unlock for our financial services. This is the start of delivering our Brexit freedoms. It is giving us back the opportunity to make ourselves competitive—a more prosperous economy, jobs for our children and grandchildren, tax revenues that will pay for our high-quality services, and higher GDP growth. All of that is contained in this Bill, at the same time as protecting the consumers that Members opposite talk about, and delivering on the ambition to put this on the statute book.

Question put and agreed to.

New clause 17 accordingly read a Second time, and added to the Bill.

6 pm

Proceedings interrupted (Programme Order, 7 September).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

New Clause 18

Composition of Panels

‘(1) FSMA 2000 is amended in accordance with subsections (2) to (8).

(2) After section 1M (FCA’s general duty to consult) insert—

“1MA Composition of Panels

(1) A person who receives remuneration from the FCA, the PRA, the Payment Systems Regulator, the Bank of England or the Treasury is disqualified from being appointed as a member of a panel established under any of sections 1N to 1QA or 138IA.

(2) Subsection (1) does not apply in respect of a panel mentioned in that subsection if regulations made by the Treasury provide for it not to apply to that panel.

(3) Regulations under subsection (2) may make provision in respect of a panel—

(a) generally, or

(b) only in relation to such descriptions of persons or cases as the regulations may specify (but the power to make such regulations may not be exercised so as to specify persons by name).”

(3) In section 1N (FCA Practitioner Panel), after subsection (5) insert—

“(6) Subsections (4) and (5) are subject to section 1MA.”

(4) In section 1O (Smaller Business Practitioner Panel), after subsection (6) insert—

“(6A) Subsections (5) and (6) are subject to section 1MA.”

(5) In section 1P (Markets Practitioner Panel), after subsection (6) insert—

“(7) Subsections (4) to (6) are subject to section 1MA.”

(6) In section 1Q (Consumer Panel), after subsection (4) insert—

“(4A) Subsection (4) is subject to section 1MA.”

(7) After section 2L (PRA’s general duty to consult) insert—

“2LA Composition of Panels

(1) A person who receives remuneration from the FCA, the PRA, the Payment Systems Regulator, the Bank of England or the Treasury is disqualified from being appointed as a member of a panel established under any of sections 2M, 2MA or 138JA.

(2) Subsection (1) does not apply in respect of a panel mentioned in that subsection if regulations made by the Treasury provide for it not to apply to that panel.

(3) Regulations under subsection (2) may make provision in respect of a panel—

(a) generally, or

(b) only in relation to such descriptions of persons or cases as the regulations may specify (but the power to make such regulations may not be exercised so as to specify persons by name).”

(8) In section 2M (the PRA Practitioner Panel), after subsection (5) insert—

“(6) Subsections (4) and (5) are subject to section 2LA.”

(9) In section 103 of the Financial Services (Banking Reform) Act 2013 (regulator’s general duty to consult) after subsection (5) insert—

“(5A) A person who receives remuneration from the FCA, the PRA, the Payment Systems Regulator, the Bank of England or the Treasury is disqualified from being appointed as a member of a panel established under subsection (3).

(5B) Subsection (5A) does not apply in respect of a panel mentioned in that subsection if regulations made by the Treasury provide for it not to apply to that panel.

(5C) Regulations under subsection (5B) may make provision in respect of a panel—

(a) generally, or

(b) only in relation to such descriptions of persons or cases as the regulations may specify (but the power to make such regulations may not be exercised so as to specify persons by name).”’—(Andrew Griffith.)

This new clause disqualifies those who are paid by a regulator, the Bank of England or the Treasury from being appointed to a statutory advisory panel, subject to any exemptions the Treasury may set out in regulations.

Brought up, and added to the Bill.

New Clause 19

Consultation on Rules

‘(1) In section 138I of FSMA 2000 (consultation by the FCA), after subsection (4) insert—

“(4A) The FCA must include, in the account mentioned in subsection (4), a list of the respondents who made the representations, where those respondents have consented to the publication of their names.

(4B) The duty in subsection (4A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation).

(4C) For the purposes of this section, the exemption relating to functions conferred on the FCA mentioned in paragraph 11 of Schedule 2 to the Data Protection Act 2018 (exemption from application of listed GDPR provisions) does not apply.”

(2) In section 138J of FSMA 2000 (consultation by the PRA), after subsection (4) insert—

“(4A) The PRA must include, in the account mentioned in subsection (4), a list of the respondents who made the representations, where those respondents have consented to the publication of their names.

(4B) The duty in subsection (4A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation).

(4C) For the purposes of this section, the exemption relating to functions conferred on the PRA mentioned in paragraph 9 of Schedule 2 to the Data Protection Act 2018 (exemption from application of listed GDPR provisions) does not apply.”

(3) In section 104 of the Financial Services (Banking Reform) Act 2013 (consultation requirements), after subsection (5) insert—

“(5A) The Payment Systems Regulator must include, in the account mentioned in subsection (5), a list of the respondents who made the representations, where those respondents have consented to the publication of their names.

(5B) The duty in subsection (5A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation).

(5C) In this section “data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act).”’—(Andrew Griffith.)

This new clause would require the FCA, the PRA, the Payment Systems Regulator and the Bank of England to publish the names of respondents to their consultations on proposed new rules, where those respondents have consented to such publication.

Brought up, and added to the Bill.

New Clause 20

Unauthorised Co-ownership AIFs

‘(1) FSMA 2000 is amended as follows.

(2) In section 261E (authorised contractual schemes: holding of units)—

(a) before subsection (1) insert—

“(A1) This section sets out requirements for the purposes of section 261D(1)(a) (authorisation orders).”;

(b) in subsection (1) for “a contractual” substitute “the”.

(3) After section 261Z5 insert—

“Chapter 3B

Unauthorised co-ownership AIFs

261Z6 Power to make provision about unauthorised co-ownership AIFs

(1) The Treasury may by regulations make provision about unauthorised co-ownership AIFs that corresponds or is similar to, or applies with modifications, any of sections 261M to 261O and section 261P(1) and (2) (rights and liabilities of participants in authorised co-ownership schemes).

(2) Regulations under subsection (1) may make provision about unauthorised co-ownership AIFs generally, or about unauthorised co-ownership AIFs of a description specified in the regulations.

(3) In this section “unauthorised co-ownership AIF” means a co-ownership scheme that—

(a) is an AIF, and

(b) is not authorised for the purposes of this Act by an authorisation order in force under section 261D(1).”’—(Andrew Griffith.)

This new clause would enable the Treasury to make provision about the rights and liabilities of participants in unauthorised co-ownership AIFs which is similar to that made in relation to authorised co-ownership schemes in Chapter 3A of Part 17 of the Financial Services and Markets Act 2000.

Brought up, and added to the Bill.

New Clause 1

National strategy on financial fraud

‘(1) The Treasury must lay before the House of Commons a national strategy for the purpose of detecting, preventing and investigating fraud and associated financial crime within six months of the passing of this Act.

(2) In preparing the strategy, the Treasury must consult—

(a) the Secretary of State for the Home Office,

(b) the National Economic Crime Centre,

(c) law enforcement bodies which the Treasury considers relevant to the strategy,

(d) relevant regulators,

(e) financial services stakeholders,

(f) digital platforms, telecommunications companies, financial technology companies, and social media companies.

(3) The strategy must include arrangements for a data-sharing agreement involving—

(a) relevant law enforcement agencies,

(b) relevant regulators,

(c) financial services stakeholders,

(d) telecommunications stakeholders, and

(e) technology-based communication platforms,

for the purposes of detecting, preventing and investigating fraud and associated financial crime and, in particular, tracking stolen money which may pass through mule bank accounts or platforms operated by other financial services stakeholders.

(4) In this section “fraud and associated financial crime” includes, but is not limited to authorised push payment fraud, unauthorised facility takeover fraud, and online and offline identity fraud.

(5) In this section, “financial services stakeholders” includes banks, building societies, credit unions, investment firms, Electric Money Institutions, virtual asset providers and exchanges, and payment system operators.’—(Tulip Siddiq.)

This new clause would require the Treasury to publish a national strategy for the detection, prevention and investigation of fraud and associated financial crime, after having consulted relevant stakeholders. The strategy must include arrangements for a data sharing agreement between law enforcement agencies, regulators and others to track stolen money.

Brought up.

Question put, That the clause be added to the Bill.

--- Later in debate ---

[Andrew Griffith]

I beg to move, That the Bill be now read the Third time.

It has been a privilege to lead on this Bill’s progression through the House, and I extend my thanks to hon. Members on both sides for their collaborative engagement, challenge and scrutiny. I extend particular thanks to the Chairs of the Public Bill Committee, my right hon. Friend the Member for Basingstoke (Dame Maria Miller) and the hon. Member for Ealing, Southall (Mr Sharma). On the Opposition Benches, I extend my particular thanks to the hon. Members for Hampstead and Kilburn (Tulip Siddiq), for Wallasey (Dame Angela Eagle), for Kingston upon Hull West and Hessle (Emma Hardy), for Glenrothes (Peter Grant) and for West Dunbartonshire (Martin Docherty-Hughes) for the constructive way in which they have approached the scrutiny of this Bill and for their support where they felt it was appropriate.

On the Government side, I am particularly grateful for the contributions from my hon. Friend the Member for West Worcestershire (Harriett Baldwin), who was plucked from the Bill Committee to her position as Chair of the Treasury Committee, and my hon. Friends the Members for Wimbledon (Stephen Hammond), for North Warwickshire (Craig Tracey) and for Hastings and Rye (Sally-Ann Hart). I also pay tribute to my predecessors, my right hon. Friend the Member for Salisbury (John Glen) and my hon. Friend the Member for North East Bedfordshire (Richard Fuller), for their efforts to prepare and introduce this Bill.

The Bill is a culmination of more than 30 consultations published by the Government over many years and follows extensive engagement. I thank all the stakeholders with whom we have consulted. Before the Bill moves to the other place, I wish to extend my thanks to the significant number of Treasury officials and lawyers for their work in preparing such a substantial Bill, my parliamentary counsel, the witnesses who gave evidence to the Public Bill Committee, the parliamentary Clerks, in particular Bradley Albrow, without whose efforts we would not have got to this point, and those who have helped Members of the Opposition support their work on this Bill.

Finally, as is customary, I wish to thank the Bill team from the Treasury: Matt Molloy, Ciara Lydon, George Guven, Nicola O’Keefe, Charlotte Bennett, Mathilde Durand-Delacre, Maithili Jayanthi, Rohan Lee, Catherine McCloskey and my assistant private secretary, Harry Coloe, who have supported me throughout this process.

We have already discussed at length the significance of this Bill. It is important to remember that our scrutiny does not end with the Bill moving on to the Lords. When the Bill receives Royal Assent, it will kickstart a wide-ranging and ambitious programme of secondary legislation and regulator rules to replace retained EU law, get back our freedoms and move to a comprehensive, domestic model of regulation. I look forward to seeing this important piece of legislation come into force. I commend the Bill to the House.

MONEY LAUNDERING AND TERRORIST FINANCING (HIGH-RISK COUNTRIES) (AMENDMENT) (NO. 3) REGULATIONS 2022

Andrew Griffith Excerpts

Monday 5th December 2022 General Committees

[The Economic Secretary to the Treasury (Andrew Griffith)]

I beg to move,

That the Committee has considered the Money Laundering and Terrorist Financing (High-Risk Countries) (Amendment) (No. 3) Regulations 2022 (S.I.2022, No. 1183).

It is a pleasure to serve under your chairmanship, Sir Gary. The Government recognise the threat that economic crime poses to the UK and to our international partners, and we are committed to combating money laundering and terrorist financing. Illicit finance causes significant social and economic costs through its links to serious and organised crime. It is also a threat to our national security, and it risks damaging our international reputation as a fair, open, rules-based economy.

That is why we have taken significant action to combat economic crime, including legislating for the economic crime (anti-money laundering) levy and passing the Economic Crime (Transparency and Enforcement) Act 2022. We are going further by developing a second iteration of the landmark economic crime plan and through the Economic Crime and Corporate Transparency Bill, which has now passed Committee stage in the House of Commons and which includes, among other things, significant reforms to strengthen the role of Companies House. We are also working closely with the private sector and our international partners to improve the investigation of economic crime, strengthen international standards on beneficial ownership transparency and crack down on illicit financial flows.

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017—the money laundering regulations—support our overall efforts. As the UK’s core legislative framework for tackling money laundering and terrorist financing, they set out various measures that businesses must take to protect the UK from illicit financial flows. Those efforts are making a difference, and over the last five years we have confiscated over £1 billion in criminal assets.

Under the money laundering regulations, businesses are required to conduct enhanced checks on business relationships and transactions with high-risk third countries. Such countries are identified as having strategic deficiencies in their anti-money laundering and counter-terrorist financing regimes, which could pose a significant threat to the UK’s financial system.

This statutory instrument amends the money laundering regulations to update the UK’s list of high-risk third countries. It adds the Democratic Republic of the Congo, Mozambique and Tanzania to the list and removes Nicaragua and Pakistan. That is to mirror the lists published by the Financial Action Task Force—the global standard setter for anti-money laundering and counter-terrorist financing.

This is the sixth time that we have updated the UK list to respond to the evolving risks from third countries. This update ensures that the UK remains at the forefront of global standards on anti-money laundering and counter-terrorist financing. The UK was a founder member of FATF, and we continue to work closely and align with international partners such as the G7 to drive improvements in anti-money laundering and counter-terrorist financing systems globally.

The high-risk third country list is one of many mechanisms the Government have to enable them to clamp down on illicit financial flows from overseas threats. We will continue to use other available mechanisms to respond to wider threats from other jurisdictions, including by applying financial sanctions as necessary.

These amending regulations will enable the money laundering regulations to continue to work as effectively as possible to protect the UK financial system. Therefore, I hope colleagues will join me in supporting them.

--- Later in debate ---

[Andrew Griffith]

I thank the hon. Member for Hampstead and Kilburn for her support and for that of the Labour party. I will do my best to respond to her points.

The hon. Lady is right that derogation from the FATF list is a possibility. Her interventions on me are often about how we should closely align with international standards, and it is the Government’s position that there is merit in working closely with FATF. The UK Government was a founder member, and we believe that the best way to tackle this issue is through co-ordinated international action. My mind is not closed to the possibility of derogation; it would be a change of policy, and I would be right for us to look at the facts in a particular case.

The hon. Lady talked about a potential crypto-kleptocracy; it was either cryptocurrency or kleptocrats, or perhaps both—kleptocrats with cryptocurrency. She will be aware of the significant work done, for example, by the Office of Financial Sanctions Implementation, particularly at the moment—I pay tribute to its work in the Russia-Ukraine context, where the UK has been one of the leading nations in taking action. Again, I do not think that the hon. Lady and I are in opposition. We should continue to look at the facts as they develop, and I will ensure that my officials engage with the issue to make sure we are clear sighted on any challenges.

Although the list is somewhat binary, there will of course be ongoing monitoring. FATF’s removal of Nicaragua and Pakistan does not bring to an end any monitoring of those countries, which are covered by a much broader set of arrangements. We always remind the businesses, banks and financial intermediaries involved that the list is just the starting point and that they have an ongoing duty of care to prevent money laundering and illicit financing. Those countries will therefore continue to be monitored.

Finally—I hope I have done reasonable justice to the hon. Lady’s other questions—let me address the issue of parliamentary scrutiny, which we talked about when I last brought amending regulations to the House. Given that the policy is generally to be aligned with FATF, it is sensible to make the procedure more of an administrative one so that we do not take up too much of Parliament’s valuable scrutiny time, which is a finite commodity. However, it is important that the list is held up to scrutiny, and I would be happy to write to the hon. Lady and other hon. Members to ensure that, when these decisions are made, we do not default in some way to a purely administrative procedure and that Parliament gets the information it needs to discharge its rightful job of scrutinising such decisions.

Question put and agreed to.

Co-operatives, Mutuals and Friendly Societies Bill (First sitting)

Andrew Griffith Excerpts

Committee stage
Wednesday 30th November 2022 Public Bill Committees

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve on this Committee with you as Chair, Mr Mundell. I begin by thanking and warmly congratulating my hon. Friend the Member for Preston on securing cross-party support for this important Bill.

Britain has a long tradition of fostering the principles of co-operation and mutual support. The histories of the Co-operative party and the Labour party in this country are closely entwined. That relationship was institutionalised in 1927, when the Co-operative party and the Labour party entered an electoral agreement to stand joint candidates in elections. Nearly a hundred years later, that agreement is going strong—as one of many Labour and Co-operative MPs, I can attest to that.

To this day, both parties continue to make the case for co-operatives and friendly and mutual societies. I have always been proud to work with the Co-operative party to promote the co-operative businesses that are leading the way in improving equality and productivity at work. As a shadow Treasury Minister, I am keenly aware of the role that co-operatives and mutuals play in trade sectors as diverse as agriculture, renewable energy, retrofitting, creative industries, manufacturing, distribution, wholesale, retail and financial services.

Those British businesses play such an important role in supporting working people across the country in gaining greater control over their lives. In the financial services sector for example, building societies provide people with a low-risk, member-focused banking alternative and research has shown that trust in building societies is consistently high. Building societies are also typically well capitalised, making the sector more resilient to financial shocks and better able to lend and plan for the long term.

At the same time, credit unions serve 1.9 million members and 2.1 million depositors across the UK. Currently, around £1.7 billion has gone out in loans to credit union members, providing a crucial lifeline to the most financially vulnerable in society and preventing people from turning to loan sharks and high-interest loans.

With the right support, the co-operative sector has the potential to provide solutions to many of the crises and challenges we face as a country, such as the cost of living crisis or climate change. But despite the distinctly British character and history of mutually and co-operatively owned companies, and the important role they play in promoting financial responsibility and resilience among their members, the sector’s needs have too often been ignored. The number of mutual credit unions has fallen by more than 20% since 2016. Ordinary families have paid the price, with many forced into the arms of unethical lenders. That will only get worse as the cost of living crisis deepens.

Unlike the United States and many other European countries, the UK is uniquely lacking in mutually or co-operatively owned regional banks, which could play a crucial role in providing the affordable credit that small and medium-sized businesses need to reach net zero. The growth of co-operatives in this country is being held back by a legislative and regulatory framework that is not designed for co-operative businesses. Given their unique structure, co-operatives, mutuals and friendly societies are often excluded from traditional investment methods.

Sadly, as we have heard, the sector is also under threat from demutualisation. There was celebration across the co-operative and labour movements last year when members voted to reject the controversial takeover of the insurer Liverpool Victoria by the private equity firm Bain Capital, yet demutualisation remains a real and present threat to the sector. That is why the provisions contained in the Bill are so important and will help to ensure that mutual capital is maintained for its intended purpose.

We welcome the Government’s support for the Bill, and we would like to use this opportunity to urge the Government to consider wider reform, such as giving co-operatives more freedom to issue perpetual capital to fund investment, to secure the future of this important sector. The Financial Services and Markets Bill, which is currently passing through the House, contains some welcome and long overdue provisions, such as enabling credit unions to offer a wider range of products, but if the Treasury wants to unlock the economic potential of the sector, it could go much further. That is why I hope that, alongside supporting this Bill, the Government will consider supporting the amendments tabled by my hon. Friend the Member for Hampstead and Kilburn (Tulip Siddiq) to the Financial Services and Markets Bill, which would give the regulators—the Financial Conduct Authority and the Prudential Regulation Authority—an explicit remit to report on how they have considered specific business models, including mutuals and co-operatives, to ensure they are given parity of esteem with standard providers.

It is time to radically reform the rules governing the sector, to give greater flexibility and to allow mutuals and co-operative financial services to grow. The Labour party and the co-operative movement share a commitment to building a society in which power and wealth are shared fairly. That is why the Labour party and the Co-operative party have agreed an important ambition for government: we will double the size of the co-operative and mutual sector in the UK. We recognise that the Bill represents an important step toward achieving that aim, and we will be giving it our full support today.

[The Economic Secretary to the Treasury (Andrew Griffith)]

It is a pleasure to serve under your chairmanship, Mr Mundell, and it is always a pleasure to follow the hon. Member for Ealing North. I congratulate the hon. Member for Preston on reaching Committee stage with this important Bill and on the role played by him and his team in championing the needs of the mutuals sector. I also congratulate my predecessor, my hon. Friend the Member for North East Bedfordshire, who did so much to pilot the Bill in its early stages and has given it his wholehearted support. It is always a pleasure to work with him, and I am pleased that we can take it forward.

I am pleased with the warm reception that the Bill has received right across the sector and on both sides of the House. A number of my colleagues look forward to their membership of the co-operative movement, and would it not be a wonderful thing if the co-operative movement once again graced both sides of the House? I always pay tribute to my thought leader in this space, my hon. Friend the Member for Devizes, who has consistently advocated the benefits of a place-based approach to policy. We continue to hang on his every word as to how we can make that a reality as we seek to level up the United Kingdom.

My hon. Friend the Member for Gloucester raised some important points. I will write to him with what I consider to be the best legal position on the perfectly fair points he raised in pursuit of facilitating transactions that would protect mutuals, and not seek to undermine them or create a loophole, which I am sure is not the spirit of what he suggests. Nor would the Government want to see that or support that.

[Richard Graham]

It was interesting that the shadow Minister, the hon. Member for Ealing North, raised an ambition to double, effectively, the size of the mutual sector. Although that is an admirable ambition, in an isolated sense, I think that there is work to be done on a review of the sector to see why some credit unions have failed, where the inability to raise capital is holding back the co-op and mutual movement, and what more can be done on some of the points mentioned by colleagues on both sides of the Committee to see where things are holding the sector back. Otherwise, the ambition in itself may not lead anywhere.

[Andrew Griffith]

I thank my hon. Friend for his point. It is a laudable ambition, which I am certainly happy to devote time to. Mutuals with the values of people in the community at their core are genuinely central to the vibrant, competitive and diverse—we are in favour of financial diversity—way in which the UK can serve the whole community. It is right that we look at how we do that, and how we can access capital. There are some technical points—I believe that Opposition Members understand that—in ensuring that we retain the tax advantages of mutuals, and do not inadvertently make them look more and more like corporate entities, which they are not, thereby prejudicing that tax treatment.

[Gareth Thomas]

I take the Minister’s point that there are some technical issues, but there has seemingly not been a great deal of will from HMRC thus far to try to find a way forward on them. Will he set out what instructions he has given to HMRC officials, perhaps to co-operate with the Law Commission, or whether separate work is being done within the Treasury to find a way around those technical issues? One of the things that came out of the LV= story—it was not a particular issue for LV=, but it certainly was for other mutuals—was that access to capital is holding back the development of friendly societies and their ability to offer more wide-ranging products and services.

[Andrew Griffith]

I am sure that my steely-eyed colleagues at HMRC do not need any particular direction, but they will have some challenge from me. I have already started to engage in that space. The hon. Member will appreciate that the corpus of law in this area is substantial, and that we should proceed cautiously. I will come on to the Law Commission, and perhaps that can be—

--- Later in debate ---

[The Chair]

Order. We cannot have a conversation. The hon. Member should either intervene or not.

[Andrew Griffith]

I also associate my remarks with those of my distinguished friend and neighbour, my hon. Friend the Member for Worthing West, about the potential for the sector. He too made the point about its important contribution to a diversity of models, and potentially looking at the cap on the rates that mutuals can attract. Particularly in an environment of rates moving around, we should look at that with an open mind, and I will continue to do so. I am sure that the hon. Member for Preston will continue to be a doughty champion for the sector, and I look forward to engaging with him going forward. I know that the Bill does not go quite as far as he would like. It is great that we have such strong ambition, but I do not think that we should let the perfect be the enemy of the good. We should celebrate this really important concrete step, which will prevent the predation of demutualisation.

More widely, the Government are supporting credit unions through the Financial Services and Markets Bill, as the hon. Member for Ealing North reminded us. It would be good to see a higher number of them. As he knows, they are regulated by the Credit Unions Act 1979, which the Bill amends to allow for a significantly wider range of products and services, including for the first time hire purchase agreements, conditional sales agreements and insurance distribution services—the ability to act as a distributor of insurance, helping both the reach of those products and their own financial growth. That will be of genuine benefit to members.

The Government are also helping building societies, another part of the broader mutual movement, to expand their opportunities for growth by ensuring that they operate within a modernised legislative framework. We have concluded our consultation on the Building Societies Act 1986 and look forward to how we will respond to it to help that important part of the sector.

--- Later in debate ---

[Gareth Thomas]

Will there be an opportunity for the House in some way to consider whether the scope of the review is as wide-ranging as those of us who are advocates of the sector across parties think is necessary?

[Andrew Griffith]

I am always happy to engage with the hon. Member. The simple answer is that I do not know whether it is for the House to engage, but I am happy—I hope my actions to date speak as loudly as my words—to engage on what that scope should be. I certainly assure him that, before the launch of a review, the sector will be consulted. If hon. Members have particular points to make, I am keen to hear them.

The future of mutuality looks bright and prosperous. That ambition is supported by the Government. I commend the hon. Member for Preston for his work on the Bill. The Government will support it.

[Sir Mark Hendrick]

I am grateful for the co-operation that the Government have shown on the Bill through successive Ministers over the past four or five months. I am encouraged to hear about the co-operation of the Law Commission and the moves to be made to involve it in a review of the sector. I look forward to seeing what the review brings forward. In the spirit of what my hon. Friend the Member for Harrow West said, I hope that the House will get the chance to deliberate the outcome of the review and to produce future legislation that will go towards solving many of the problems that I identified in my original draft of the Bill.

This is not the Bill that I introduced, but a good chunk of it is there, and I am grateful for the asset lock that is being introduced. I hope that we can also work to deliver, in future, further aspects of my original Bill in order to reach what I think is a conducive and favourable environment for co-operatives, mutuals and friendly societies in this country. If we look at the examples of the sector in other countries, in particular in mainland Europe, we can see that we are well behind in the degree of contribution to the GDP of those countries, compared with the degree of the contribution to GDP of the sector in this country.

A lot remains to be done, but I thank the Minister for bringing forward that work to ensure that we can get there at some stage in the future. Thank you, Mr Mundell, and I thank the Minister, the Treasury team and everyone else present today to support my Bill.

Amendment 1 agreed to.

Clause 1, as amended, ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Title

Amendments made: 2, in title, line 1, leave out from “Make provision” to “to permit” in line 3.

This Amendment and Amendment 3 would amend the long title of the Bill to reflect that the purpose of the Bill is to permit the capital surplus of mutual entities to be non-distributable.

Amendment 3, in title, line 4, leave out—

“; to amend the Friendly Societies Act 1992”.—(Sir Mark Hendrick.)

See the explanatory statement for Amendment 2.

Bill, as amended, to be reported.